Andrea Montanino
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Transcript Andrea Montanino
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
EU FISCAL RULES IN BRIEF
What?
How much?
Where?
Deficit ceiling
3% of GDP
Maastricht
Treaty
Debt
ceiling/target
60% of GDP
Maastricht
Treaty
Deficit target
Close to
balance
Stability and
Growth Pact
DEBT DYNAMIC IN EU
General government consolidated gross debt - Excessive deficit procedure (based on ESA 1995)
130
75
Percentage of gross domestic product at market prices
70
120
65
110
60
(Right axis)
100
55
50
90
45
80
40
70
35
60
30
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
DE
FR
EU-15
IT
IS DEBT CRITERION STRINGENT
ENOUGH?
b s i y π b SF
[1]
b 0 s b i y π b SF,
[2]
s d ib 3%
[3]
s s if
b
c
d
c
(y )
3% SF
b
b
[4]
THE IMPACT OF STOCK-FLOWS
OPERATIONS
Cumulative stock-flow operations in EU countries (1997-2003)
% GDP
35,0
30,0
25,0
20,0
15,0
10,0
5,0
0,0
BE
DK
DE
EL
ES
-5,0
Source: European Commission AMECO database
FR
IE
IT
NL
AT
PT
FI
SE
UK
EU-15
ENSURE DEBT REDUCTION
b
b
3% SF
y
b
b
[5]
[6]
WHY REDUCING DEBT NOW IS
IMPORTANT: THE ISSUE OF LONG
TERM SUSTAINABILITY OF PUBLIC
FINANCES
Deficit
Maastricht
SGP
Maastricht and a more
realistic growth
scenario
"realistic" SGP and
"realistic" growth
3.0%
0.0%
GDP
Long term
nominal
debt to
growth
GDP ratio
rate
5.0%
60.0%
0.0%
3.0%
3.5%
85.7%
0.5%
3.5%
14.3%
THE SGP AND THE REPAYING OF THE
DEBT
Years necessary to reach a debt to
GDP ratio around 15%
BE
DK
DE
EL
ES
FR
IE
IT
LU
NL
AT
PT
FI
SE
UK
EUR-12
EU-15
Deficit and
Debt/GDP CTB and current
growth as last 5
in 2006
real growth
years
94
98
55
26
39
4
58
88
43
47
38
57
67
35
12
4
89
105
3
0
0
45
56
19
61
92
53
55
41
36
5
18
12
1
39
39
14
63
74
59
68
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
AGE-RELATED EXPENDITURE
PROJECTIONS IN EU COUNTRIES
BE
DK
DE
EL
ES
FR
IE
IT
LU
NL
AT
PT
FI
SE
UK
2000
23,9
28,5
24,0
21,8
21,3
26,5
10,1
24,2
7,6
21,4
26,9
21,5
25,3
27,0
17,4
2005
22,5
29,1
23,7
21,1
19,3
26,3
9,6
24,4
7,4
21,8
27,1
22,0
24,8
26,8
17,5
2010
22,9
31,0
23,4
21,1
19,1
26,9
9,7
24,5
7,9
23,1
27,4
23,0
25,5
27,2
17,3
2020
24,1
32,7
24,9
24,0
20,2
29,3
11,2
25,5
8,6
25,5
28,5
24,6
27,1
27,8
17,0
2030
27,0
34,3
28,4
28,8
23,0
30,6
11,9
26,6
9,5
28,3
31,3
24,9
30,2
30,0
18,0
2040
27,9
34,7
29,9
33,5
26,9
30,6
12,2
27,1
9,8
30,4
32,1
25,5
32,0
31,0
17,3
2050
27,5
33,9
30,2
34,8
28,7
30,5
13,2
25,8
9,5
30,3
31,1
25,1
31,8
30,6
18,0
change
3,7
5,4
6,1
13,0
7,4
4,0
3,1
1,6
1,9
8,9
4,2
3,5
6,5
3,6
0,6
Source: Economic policy Committee (2003): it includes pensions, health care,
education and unemployment benefits
AN AGGREGATE PICTURE
debt/GDP
160
140
120
100
80
60% reference value
60
40
Source: Commission Services
EU - non compliance SCPs 2003
EU baseline
2049
2047
2045
2043
2041
2039
2037
2035
2033
2031
2029
2027
2025
2023
2021
2019
2017
2015
2013
2011
2009
2007
2005
2003
20
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
USEFUL REFERENCES
Public Finances in EMU – 2003
http://europa.eu.int/comm/economy_finance/publications/publicfinance_
en.htm
Economic Policy Commitee long term projections and methodological
references
http://europa.eu.int/comm/economy_finance/epc/epc_ageing_en.htm
National Stability and Convergence Programmes and Commission
assessements
http://europa.eu.int/comm/economy_finance/about/activities/sgp/year/ye
ar20032004_en.htm