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15 October 2009

Commissioner Almunia: “Exit strategies are essential for the sustainability of public finance”


The long-term sustainability of public finances is a concern for all EU countries. Fiscal exit strategies aimed at achieving ambitious and realistic medium-term objectives need to be designed now and implemented in a co-ordinated manner.

"Addressing the long term sustainability of our public finances is one of the key drivers of our exit strategy," says European Economic and Monetary Affairs Commissioner Almunia.

 

The long-term sustainability of public finances is a concern for all EU countries, although to a considerably varying degree across its Member States. On the basis of a series of detailed indicators and sensitivity analyses, the Commission Communication and Technical report makes an overall assessment of the risks to sustainability which are faced by its Member States. The sustainability gaps have widened in most countries as a consequence of the economic crisis, and several countries are now in a higher, long-term risk category.

The Commission communication also highlights the need to consider reforms in healthcare. While an increase in the quality of public finances is indispensable in order to reduce non-productive expenditure,  shift resources to education and research and other policy objectives i.e. social, environmental, health. Fiscal consolidation achieved, where necessary, by raising additional revenue should take incentive effects, efficiency and competitiveness into account and focus on these measures in order to obtain the least distorted effect.

The communication shows that successful fiscal expansions to counter recession and longer-term sustainability are not incompatible.

Fiscal exit strategies aimed at achieving ambitious and realistic medium-term objectives need to be designed now, and implemented in a co-ordinated manner as soon as the recovery takes hold, taking into account the specific situations of individual countries. To support the required reforms and enhance the credibility of fiscal adjustment – which will inevitably extend over a number of years, Member States may also need to further develop their own budgetary framework. In terms of the Stability and Growth Pact, debt sustainability should get a very prominent (and explicit) role in surveillance procedures.

 

Press release

 



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