We've contrasted a series of data looking at the United States and the EU. Let's focus just on fiscal data here since we've given it quite a bit of time in earlier sessions. Here, you can see the taxes that are paid or tax rates on one chart, and the other chart is total taxes from all sources and all levels of government divided by GDP. Actually, the right-hand chart is the best indicator of how much people pay of their income in tax. So here, you can clearly see that there's a big difference between the United States and the EU and how much they pay in taxes. In fact, the difference is more than 10 percentage points of GDP and sometimes 15. So the Europeans do pay much more of their income in tax than Americans do. What is it that the Europeans spend so much money on? Well, a lot of it is social spending because actually their defense budgets are much smaller than the US defense budget. Social spending means health, unemployment, pensions, disability, other social programs. In here, with their welfare state, the Europeans end up spending quite a bit more. This first slide shows you as a percent of GDP what social spending looks like, and you can see the United States is only about 20 percent of GDP while a country like France is above 30. Where specifically does the money go? Well, this is an interesting chart from the OECD showing spending again as a percent of GDP on different programs. So there's the old age, there's disability, there's unemployment, and health is there as well. There, you can observe how much, what percent of GDP each country spends on these different programs. Some non-EU countries are there too for you to be able to compare. But one thing I want to point out to you, for instance is, how high spending on pensions is everywhere, but particularly in Europe. Then, health spending which is very high but also surprisingly high in the United States, and this is only public spending on health which is a very interesting piece of data. We mentioned that both Japan and the United States have fiscal deficits almost every year. Well, the eurozone is the same. On this chart, we see government spending as a percent of GDP and government tax revenues as a percent of GDP. Of course, a gap between them means that either taxes or revenues are bigger. In this particular case, spending is bigger than tax revenues every year in both of these countries. But as you see, as we move to the right, Europe is getting closer together. In other words, taxes as a percent of GDP is coming very close to government spending as a percent of GDP. This would indicate that the government's deficit is starting to disappear. In other words, that its budget is coming close to balance. Here, on this chart, you can see how that's happening. We observed in the United States the trend that there was always a deficit ever since the early 90s, but we showed at the end of the period with the recent tax cuts that this deficit was getting larger even though the economy was doing better. In Europe, we see the opposite situation, we see the deficit was quite large during the crisis, but it's getting smaller at the end of the period, and there seems some chance that maybe soon those budgets could balance across Europe. Of course, every year when a country has a deficit, they tend to be adding to their debt, and so on this slide we can see the same profile both countries with debts going up, government debts going up, during the financial crisis because of how deep the recession was and how deep the recessionary gap was afterwards. But we see right at the very end of the period, that European debt dips below US debt. That's a consequence of what we saw in the last slide where European budgets are coming closer to balance while US budgets are veering away from balance. So currently, the eurozone, as a whole, has a smaller government debt as a percent of GDP than the United States. Now, the interesting thing about Europe though is that it isn't a single debt like it is in the United States. Each country has their own public debt. So when we look at eurozone debt, we're taking, we're adding up all their debts and dividing them by all of their GDPs. This slide gives you a picture of some individual countries and what their debts look like as a percent of their GDP. Over on the right, we see that some of the highest debts in the world, as a percent of GDP after Japan, are in Europe. So you can pick out very quickly, Greece, you find Italy, and I've highlighted also the UK and Spain, so you can see them all of them with debts larger than the US debt as a percent of GDP.
