PUBLIC DEBT DYNAMICS IN THE EU

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PUBLIC DEBT DYNAMICS IN THE EU
Andrea Montanino European Commission
Directorate General Economic and Financial
Affairs, Public Finances with particular
reference to the euro zone
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EU FISCAL RULES IN BRIEF
What?
How much?
Where?
Maastricht Treaty
Deficit ceiling
3 of GDP
Debt ceiling/target
Maastricht Treaty
60 of GDP
Stability and Growth Pact
Close to balance
Deficit target
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DEBT DYNAMIC IN EU
(Right axis)
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IS DEBT CRITERION STRINGENT ENOUGH?
1
2
,
3
4
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THE IMPACT OF STOCK-FLOWS OPERATIONS
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ENSURE DEBT REDUCTION
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6
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WHY REDUCING DEBT NOW IS IMPORTANT THE ISSUE OF
LONG TERM SUSTAINABILITY OF PUBLIC FINANCES
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THE SGP AND THE REPAYING OF THE DEBT
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SUSTAINABILITY INDICATORS

• Extrapolation of debt levels up to 2050 based
• targets for budget balance in 2007 as set down in
  stability and convergence programmes
• constant tax burden and non-age related primary
  expenditures at 2007 level
• projected increase in age-related spending based
  on Economic Policy Committe or national
  projections

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AGE-RELATED EXPENDITURE PROJECTIONS IN EU
COUNTRIES
Source Economic policy Committee (2003) it
includes pensions, health care, education and
unemployment benefits
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AN AGGREGATE PICTURE
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TO SUM UP

• Rational for EU fiscal rules and in particular
  for the Stability and Growth Pact can be found in
  long term challenges.
• Long term sustainability is not ensured in EU
  countries and the risk of repaying the debt is
  more theoretical than real. The 3 ceiling is
  not sufficient to ensure sustaianbility in the
  long term
• Debt raises concern
• It is increasing in some countries
• It does not reduce at a satisfactory pace in
  some of the high debt countries
• More focus on debt and long term sustainability
  is needed in the EU framework

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USEFUL REFERENCES
Public Finances in EMU 2003 http//europa.eu.in
t/comm/economy_finance/publications/publicfinance_
en.htm Economic Policy Commitee long term
projections and methodological references http//e
uropa.eu.int/comm/economy_finance/epc/epc_ageing_e
n.htm National Stability and Convergence
Programmes and Commission assessements http//euro
pa.eu.int/comm/economy_finance/about/activities/sg
p/year/year20032004_en.htm