Brussels, 14/10/2009 (Agence Europe) - Developments in public finances with regard to the ageing population, which were central to the European Commission's concerns even before the economic and financial crisis, have become even more so in the current context. The need for short-term fiscal effort to boost the economy is accepted, but the risks to the sustainability of public finances because of the ageing population require a return to budgetary consolidation as soon as possible. This is an issue that affects all member states, but is more pressing for some (because of the greater impact of their health and retirement pension spending). This point was highlighted by the Commission in a communication and a report adopted on Wednesday 14 October, which reveals that the gulf between countries has widened as a result of the crisis and that several member states now find themselves in a dangerous long-term position.
As a result of the pension reforms completed and a favourable budgetary situation, Bulgaria, Denmark, Estonia, Finland and Sweden remain in the low-risk category for long-term public finances. Given their current budgetary positions (more or less good) and the (greater or smaller) impact of the ageing population, Austria, Belgium, France, Germany, Hungary, Italy, Luxembourg, Poland and Portugal find themselves in very different situations, but may, nevertheless be classed in the medium risk group. With deficits of more than 6% of GDP (and often much more), Cyprus, the Czech Republic, Greece, Ireland, Latvia, Lithuania, Malta, the Netherlands, Romania, Slovakia, Spain and the United Kingdom belong to the high risk group. Compared with the previous listing, 10 countries have been placed in a higher risk category (Austria, Ireland, Latvia, Lithuania, Malta, the Netherlands, Poland, Slovakia, Spain and the United Kingdom). Only Hungary and Portugal have moved to a lower risk group.
To counter the surge in public debt, budgetary consolidation and structural reform will have to be combined to support growth potential, the Commission says, stating that as part of the multilateral supervision of the Growth and Stability Pact (GSP), the criterion of public debt sustainability must, no matter what, be given careful consideration. “Addressing the long-term sustainability of our public finances is one of the key drivers of our exit strategy,” Almunia said. “We need to continue supporting the recovery but in a context of severely deteriorated public finances, measures to increase confidence and support demand can only be successful if they are perceived by markets and public opinion as temporary and consistent with long-term sustainability,” he added. (A.B./transl.rt)