GERMANY and Estonia were the only two countries in the 17-member eurozone that managed to reduce their debt levels in the first three months of this year.

At the end of March, the government debt to GDP ratio in the Euro area stood at a record 92.2pc, compared with 90.6pc at the end of last year.

The stark data shows the extent to which high debt levels are crippling many European countries, and raising questions about the merits of austerity.

And across the 27 member states of Europe, the ratio increased from 85.2pc to 85.9pc.

Lowest

While Ireland recorded the biggest increase in debt-to-GDP ratio, troubled Greece, as expected, topped the list with debt levels in the Mediterranean country at a staggering 160.5pc of the value of its economy.

Italy was second at 130.3pc, while Portugal was at 127.2pc and Ireland was at 125.1pc.

The lowest was Estonia, which came in at just 10pc, followed by Bulgaria at 18pc and Luxembourg at 22.4pc.

Six countries across Europe managed to reduce their debt, although four of these were not in the eurozone.

The UK reduced its debt to GDP ratio by 0.6pc to 88.2pc, while Latvia dropped 1.5pc to 39.1pc, Denmark fell 0.8pc to 44.7pc and Bulgaria's debt fell back 0.6pc to 18pc.

Leeway

To help economic growth, European governments have decided to slow down the pace of fiscal tightening, triggered in 2010 by quickly rising borrowing costs as investors worried that huge debts diminished their prospects of getting their money back.

Countries including France, Spain and Portugal have been given more time by top brass at the European Commission to reduce their budget deficits, allowing them the leeway to focus more on policies to stimulate growth.

The bloc is in the longest recession since the creation of the single currency in 1999, with five member states receiving international aid, including Ireland; a record high jobless rate; and fragile prospects for an export-driven recovery later this year.

Economists warn that examining debt figures for just one quarter is a risky strategy and that studying trends on an annual basis paints a more realistic picture.

But if the trend continues throughout the year, fresh questions will be raised about the merits of austerity as its purpose is to reduce a country's debt level.

Indo Business