The new, 10th edition of the report Public Finances in EMU – 2009, has been published.
The report says that public finances in the EU have come under unprecedented stress as they play a central role in overcoming the financial and economic crisis.
The report summarizes the measures under the European Economic Recovery Programme (EERP). According to the report, automatic stabilizers due to larger government spending in the EU and particularly the more extensive social security systems than in the US, have contributed support to the EU economy.
The public debt-to-GDP ratio in the EU is expected to jump by 21 percentage points to 79.4% of GDP until 2010. The expected sharp budgetary deteriorations and increases in public expenditure-to-GDP ratios, in addition to pressures on many Member States’ public finances from rising age-related spending, will eventually require tough choices with a view to maintaining long-term sustainability.
The authors of the report believe that the Stability and Growth Pact contains the sufficient flexibility to cope with the unprecedented challenges of the crisis while at the same time providing a framework for future consolidation strategies.