In order to encourage the implementation of rigorous fiscal consolidation, the Council agreed that it is of utmost importance to ensure government debt sustainability, through credible and detailed consolidation plans, in addition to pension, health care and labour market reforms. It emphasises that in Member States facing very large structural budget deficits or very high or rapidly increasing levels of public debt, fiscal consolidation should be frontloaded. Where economic growth or revenues turn out to be higher than expected, fiscal consolidation should be further accelerated.
Furthermore, it underlines that the growth of expenditures net of discretionary revenue measures should be kept clearly below the medium-term rate of potential GDP growth. Where taxes need to be increased – while recognising that taxation issues fall within the scope of the powers of Member States – preference should be given to raising indirect taxes and to the broadening of tax bases. Unjustified tax expenditures and subsidies should be eliminated.
In relation to correcting the macroeconomic imbalances, the Council calls for urgent actions needed to correct harmful and persistent macroeconomic imbalances – especially large current account deficits – and to improve the competitiveness of the concerned Member States. In parallel, Member States with large current account surpluses should pursue measures aimed at implementing structural reforms conducive to strengthening potential growth and thereby also underpinning domestic demand.
To ensure the stability of the financial sector, the Council stresses that the restructuring of banks should be accelerated, and, taking into account the need to safeguard financial stability, the gradual withdrawal of public financial support to the bank sector should be continued.
In connection with structural reforms concerning growth and job creation, the Council emphasises the importance of complementing fiscal consolidation efforts with well-designed growth-enhancing and resource-efficient structural reforms.
© European Council
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