(European Economy. 4. July 2013.
Brussels. PDF. 232pp. Tab. Graph. Bibliogr. Free.)
The Report presents recent budgetary developments, describes advances in budgetary surveillance and proposes a new indicator of fiscal effort based on a narrative approach. It also shows the developments of health expenditures and the possibility of introducing cost-containing reforms that preserve high quality standards in the provision of health services.
Lucio Pench, Director Fiscal Policy, Directorate-General for Economic and Fiscal Affairs, talks about the latest Report on Public finance in the EMU
Part I discusses the 2012 - 2013 developments in the implementation of fiscal surveillance.
Since 2010 the Member States have implemented impressive fiscal efforts despite strong economic headwinds, which improved fiscal sustainability and allow slowing the pace of consolidation.
Fiscal effort done (2010-2013) and planned (2014-2016)
Changes in the structural balance
(% of GDP, Commission forecast and Stability and Convergence Programme)
Part II looks at the latest steps taken to improve economic governance in the EU.
Particular reference is given to the “Two Pack”, which provides the framework for the assessment of draft budgetary plans submitted by Member States in the euro area, and to the Medium-Term Budgetary Objectives.
The assessment of the Draft Budgetary Plans at the EU level
While the structural balance is a good indicator of fiscal stance, a new fiscal effort indicator - the Discretionary Fiscal Effort (DFE) - offers a useful complementary perspective. It focuses on the amount of measures effectively introduced on the revenue side and the difference between primary expenditure growth and medium-term potential on the expenditure side. This indicator shows that the size of fiscal efforts has been differentiated according to fiscal space.
Fiscal stance in 2012 according to the structural balance (∆SB), structural primary balance (∆SPB) and Discretionary Fiscal Effort (DFE) (% of GDP net of one-offs)
There is still scope to improve the composition of consolidation and make it more growth-friendly, by reducing expenditures via the improved efficiency of public spending. Particular attention is given to the health expenditure, a sector where expenditures are projected to grow in the coming years and where cost-reducing reforms are possible while keeping a high level of services.
Click on the chart to enlarge it.
Projections for Healthcare Expenditure as % of GDP