Friday, 16 September 2011

Economic policy making becomes challenging

In a 2010-2014 perspective, according to the convergence programmes of the non-eurozone EU members and the stability programmes of the euro area member states, the public finances were returning to more sustainable deficit levels as a whole:

In the EU, the general government deficit is planned to fall from 6.3% of GDP in 2010, to 4.6% in 2011, 3.4% in 2012, 2.3% in 2013 and 1.4% in 2014. Meanwhile, the corresponding figures for the euro area are 6.0%, 4.3%, 3.1%, 2.1% and 1.3%.

Source:

Directorate-General for Economic and Financial Affairs (Ecfin) of the European Commission: 2011 Report on Public finances in EMU (European Economy 3/2011), page 38

However, both global and European growth prospects have dimmed considerably since then. According to the updated Commission forecast economic growth in the EU and the eurozone would practically grind to a halt during the third and the fourth quarters of 2011:

Ecfin: Interim Forecast September 2011 (14 pages)

The less economic growth, the more challenging the making of economic policy becomes, especially where robust and democratic structures are in short supply.



Ralf Grahn