Only two months after the Lisbon European Council underlined in its conclusions that the opportunity provided by the recent strong European growth must be used to pursue fiscal consolidation more actively and to improve the quality and sustainability of public finances, the Commission presents a first report assessing the contribution of public finances to growth and employment. The report prepared by the Directorate General of Economic and Financial Affairs on the initiative of Commissioner Solbes analyses public finances in EMU from a truly European perspective. Its recommendations have important implications for economic policy co-ordination and the recent euro-11 ministers' decision to accelerate fiscal consolidation and structural reforms in the Union.
Member States are called to:
(i) surpass the budget targets set in the updated stability and convergence programmes in light of the upward revision of growth forecasts;
(ii) avoid loosening their budgetary policies during the current economic upswing and allow automatic stabilisers to work throughout the economic cycle;
(iii) to enhance the quality of public finances by reducing the tax burden on labour. To get the right balance between further tax reforms and deficit reductions, tax cuts will need to be matched with corresponding reductions in spending.
|ISBN 92-828-9657-9 (online)|