Taxes form the backbone of public revenues across Europe, enabling governments to fund essential services like education, healthcare, and social protection.
Yet, where does public spending actually go? What do governments spend money on, and how is it allocated?
According to Eurostat, tax revenues accounted for 40.3% of GDP in the EU in 2024. However, general government total expenditure surpassed this, reaching 49.6% of GDP.
Social Protection Claims Two in Five Euros
As government spending as a percentage of GDP varies significantly across European countries, analyzing the distribution of total spending offers a clearer comparison.
For instance, in the EU, 19.6% of GDP was allocated to social protection, representing 40% of total government spending—meaning two out of every five euros go toward social protection.
Social protection is designed to shield individuals from risks such as unemployment, parental responsibilities, illness, disability, the loss of a spouse or parent, old age, housing instability, and social exclusion.
Pensions constitute the largest component of social protection benefits, accounting for nearly half of the total, which also includes sickness, disability, and unemployment benefits.
Across 31 countries—including the EU, the UK, Norway, Switzerland, and Iceland—social protection accounts for the largest share of government spending in every nation, ranging from 26% in Hungary to 45.9% in Finland.
The share of social protection exceeds the EU average of 40% in Luxembourg (42.5%), Italy (42.2%), Denmark (41.5%), France (41.5%), Austria (41.3%), Germany (41.3%), Spain (41%), and Portugal (40.4%).
All four major EU economies exceed the 40% threshold, while the UK stands at 34.5%, according to the OECD.
A European Central Bank report by Marta Rodríguez-Vives and Linda Kezbere emphasizes that there is no universal optimal level of social spending as a share of the economy.
“The structure of pension systems varies significantly across euro area countries,” it adds.
Rankings by Share vs. Actual Amounts
This wide gap highlights how governments prioritize policies and spending. However, as GDP and total government expenditure vary widely in nominal terms, spending shares and actual amounts can differ considerably.
Consequently, examining social protection spending per capita in both euros and purchasing power terms provides a more meaningful country-level comparison.
Health: Second-Largest, But Not Universal
Health is the second-largest spending category in the EU on average, with a 15% share. While this holds true for most countries, other categories rank second in nine nations, including Italy, Hungary, Romania, Bulgaria, Greece, Malta, Luxembourg, Latvia, and Switzerland.
Health spending ranges from 6.7% in Switzerland and 10% in Hungary to 24.3% in Ireland.
The UK allocates a comparatively larger share of government spending to health at 19%, compared to major EU economies like France (15.6%) and Germany (15.4%).
The ECB report notes that differences in healthcare financing models affect government health spending, as costs are shared between governments and households in varying proportions.
Social Protection and Health Dominate Spending
The combined share of social protection and health exceeds 50% in two-thirds of countries, accounting for 55% of government spending in the EU.
All four major EU economies exceed the EU average, as do all five Nordic countries.
Hungary (36%) and Malta (39.5%) are outliers with shares below 40%, while Ireland and Finland exceed 59%.
Three categories—general public services (12.4%), economic affairs (10.8%), and education (9.7%)—cluster around 10% in the EU, though significant differences exist across countries.
General public services cover the basic running of government, including administration, parliament, public finances, foreign affairs, public debt, and transfers between different levels of government.
Their share varies significantly, from 7.5% in Bulgaria to 21.2% in Hungary.
General public services also account for the second-largest share of government spending in Hungary, Greece (17.1%), and Italy (15.4%) after social protection.
Economic affairs are the second-largest spending category in Malta, Latvia, Romania, Bulgaria, and Luxembourg, ranging from 6.5% in Denmark to 20.3% in Malta.
It covers government spending on the economy, including jobs, business, agriculture, energy, industry, transport, communications, and economic research.
Education: Switzerland Leads in Spending Share
Education holds the second-highest share only in Switzerland, at 16.3%. Remarkably, spending on education falls below the EU average in all four major EU economies, with Italy having the lowest at 8%.
These five categories make up between 80 and 92% of government spending across countries, with the EU average at 87.9%.
Defence is the sixth-largest spending category in the EU at 3.5%. The UK allocates a comparatively higher share at 4.9%, compared to major EU economies like France (3.2%) and Germany (2.7%).
Spending on recreation, culture, religion, environmental protection, and housing is very limited, with these three categories accounting for just 5.6% of total government spending in the EU.