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European Commission releases Fiscal Sustainability Report 2012

18.12.2012 - The report analyses the sustainability of public finances in the Member States, against the background of the impact of the financial, economic and fiscal crisis and of demographic ageing.

The Fiscal Sustainability Report 2012 has been released on 18 December by the Commission services (Directorate General for Economic and Financial Affairs).

Looking beyond the short term, the deterioration in fiscal positions and increases in government debt since 2008, together with demographic ageing, compound each other and make fiscal sustainability an acute policy challenge. Unless policies (fiscal and structural) are adjusted further, debt in the EU would remain very high in the coming decade. As the fiscal pressure from an ageing population takes hold more firmly around the mid-2020s, it would start to rise further.

Strict adherence to EU fiscal rules necessary

However, the report shows that by taking determined action through improving the fiscal positions further in a gradual and steadfast manner and by attaining the medium-term budgetary objectives (MTOs) the EU countries have set for themselves, government debt would be on a clear downward path in the EU. It would fall below 60% of GDP by 2030. Hence, strict adherence to the EU fiscal rules is necessary, and it will lead to sustainable debt levels. It should be underpinned by structural measures to contain entitlement spending within sustainable levels. By enhancing the credibility of government action, reforms can broaden to some extent fiscal space in the short term.

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