Public Finances in EMU-2003

Abstract

The most difficult period for budgetary policies since the launch of the euro2002 and the early part of 2003 has been a difficult period both in terms of actual budgetarydevelopments and as regards the implementation of the EU framework for fiscal surveillance.The nominal deficit for the euro area as a whole increased from 1.6% of GDP in 2001 to 2.2%in 2002 and, according to the latest Commission forecast, it is projected to rise to 2.5%ofGDP in 2003. This aggregate outcome is the result of striking contrasts in the performanceacross Member States. By the end of 2002, only six EU countries, including four euro areacountries (accounting for some 18% of euro area output) had achieved budget positions (bothin nominal and cyclically adjusted terms) that met the 'close to balance or in surplus'requirement of the Stability and Growth Pact, whereas two euro area countries (accounting forhalf of the euro area output) had deficits above the 3% of GDP reference value