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.
Posted in Budget and Finance, Bulgaria, EU Reform, Institutional Affairs, Internal Market
Tagged Budget, Economic Crisis, Economic Policy, European Economic Recovery Programme, eurozone, GDP, Public Finances
North Korea performed an underground nuclear blast test with approximate 20 kilotons equivalent. The news has been somewhat underreported given its importance.
The UN Security Council condemned the test and called for possible new sanctions for North Korea. The Presidency of the European Union has also condemned the test, saying that it has undermined stability on the Korean peninsula and in the region and represents a threat to international peace and security.
That is the widely expected political reaction. More importantly, new analyses appear to tell us why this test is so worrying, what it means for countries in the region, and an old one reminds us what it may mean for the economic development (i.e. deepen the crisis).
The forthcoming G20 meeting is expected to outline a new policy division between the US and EU on fiscal stimulus to counter the financial and economic crisis.
Mr. Jean-Claude Juncker, president of the eurogroup, said “The 16 euro area ministers agreed that recent American appeals insisting that the Europeans make an additional budgetary effort to combat the effects of the crisis was not to our liking (…)Europe and the eurogroup have done what they needed to do.”
This contradicts to appeals by Barack Obama’s top economic adviser, Lawrence Summers, who said that the urgent need for a short-term increase in spending by governments temporarily overrides the longer-term goal of tackling the global imbalances.
The G20 meeting will be the arena of an indeed important debate, since some of the leading economists that predicted this economic crisis (the Nobel laureate Paul Krugman and Nouriel Roubini) say that we need a lot of fiscal stimulus, among other things.
Advising on policy measures from a scientific standpoint is easy; implementing policy measures being an elected politician is quite different. However, it may be useful to at least discuss different views, rather than not.