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[...] The economic climate in the euro area is gradually improving, although investment remains subdued and the recovery is vulnerable to the increasing turbulence in the global economy. Years of fiscal consolidation have brought down government deficits in the euro area. The government deficit ratio for the euro area as a whole peaked at 6.3% of GDP in 2009. From 2.0% of GDP in 2015, the ratio is expected to fall further, to 1.7% of GDP in 2016. Based on the autumn forecast, the number of Member States in the corrective arm would therefore be projected to fall from a high of 15 in 2010 to 3 in 2016. As a result, the aggregate debt-to-GDP ratio has started to decline this year and should be brought on a declining path in line with the debt rule. Given the still high debt levels as well as the challenges of an ageing society, fiscal consolidation must continue in a growth friendly and differentiated manner to ensure sustainability.
Interest expenditures in the euro area have fallen by over 1.5Pps of GDP over recent years. Recent Eurogroup meetings have stressed the need for prudent fiscal policies to build resilience for when interest rates inevitably rise again.
The Commission's forecast indicates a broadly neutral planned fiscal stance for the euro area as a whole in 2016. In line with the Commission analysis, this reflects a balance between long-term fiscal sustainability and short-term macroeconomic stabilisation, particularly in light of historically low interest rates and the high external surplus of the euro area. At the same time, the Commission assessment of the individual budgetary plans shows an uneven distribution, with four Member States at risk of not meeting their current obligations under the Stability and Growth Pact (SGP) in 2016, and others outperforming their MTO. The SGP provides significant flexibility to adjust fiscal policy to developments in Member States. The current refugee crisis is one such development and we take note that the Commission will take into account duly justified additional expenditure related to this crisis when making its ex post assessments of compliance with the Stability and Growth Pact. [...]
[...]The draft budgets show that many Member States are planning or implementing measures to reduce the tax burden on labour, with sizeable reforms in Member States with comparatively high labour taxes such as Austria, Belgium and France. However, the challenge is sizeable and further progress in many Member States would help to improve growth and employment outcomes. [...]