European Economy. Public Finances in EMU-2006.

Abstract

Recent budgetary developments and prospectsIn 2005, the budgetary position in the euro area and theEU improved significantly. In the euro area, the govern-ment deficit fell by 0.4 percentage point and reached2.4 percent of GDP. The deficit of the entire EU alsoimproved by 0.3 percentage points and reached 2.3 per-cent of GDP in 2005. The deficit reduction in the euroarea and in the EU reflects better than expected eco-nomic growth, better than expected revenues, as well asstructural budgetary adjustment. It was particularlyimportant in the countries currently subject to an exces-sive deficit procedure (EDP). According to the spring2006 forecasts of the Commission services, the euro areaand EU deficits would remain roughly stable in 2006 and2007, based on the assumption of unchanged policy.After increasing in 2005 for a second consecutive year,the debt-to-GDP ratio in the EU would fall from63.4 percent in 2005 to 62.9 percent in 2006.