Posted on 11/09/2009 2:32:53 AM PST by bruinbirdman
The European Unions public debt could by 2014 rise to 100 per cent of gross domestic product a years economic output unless governments take firm action to restore fiscal discipline, EU finance ministers will be warned on Monday.
The stark message is contained in a European Commission analysis, which highlights the rapid deterioration in EU public finances caused by emergency measures in the past 12 months to rescue Europes financial sector and combat recession.
Finance ministers of the 16-nation eurozone will discuss the Commissions paper at informal talks on Monday evening and it will also be addressed at a meeting on Tuesday of all 27 EU ministers.
As recently as 2007, the euro areas public debt was only 66 per cent of GDP. But, even at this level, it was above the 60 per cent target set for countries aspiring to join the eurozone.
In its latest six-month economic forecast, published last week, the Commission predicted that the eurozones public debt would rise to 84 per cent of GDP next year and 88.2 per cent in 2011. But the new document paints a more sombre picture.
The document says, based on projections of a return to long-term pre-crisis growth levels, that without consolidation, the gross debt-to-GDP ratio for the EU could reach 100 per cent of GDP as early as 2014, and keep on increasing.
In spite of mounting concerns about the boom in debt, EU government leaders agreed at a summit on October 29-30 that the fragile nature of Europes recovery made it advisable to delay efforts towards fiscal consolidation until 2011.
The latest paper backs this position, saying: A financial meltdown and a generalised loss of confidence have been avoided. However, uncertainty remains high, and there are still risks of negative feedback loops between the financial sector and the real economy.
In a report published on Monday the Lisbon Council, a Brussels-based think-tank, recommends that EU governments cap expenditure at 2 percentage points below nominal GDP growth from 2011 onwards.
The Commission identifies five countries as at particular risk Greece, Ireland, Latvia, Spain and the UK because their public finances will come under strain from large increases in pension and healthcare costs, and high deficits triggered by the financial crisis.
This is particularly the case for Greece, which faces the second-highest increase in age-related expenditure in the EU, while its high debt ratio adds to concerns on sustainability.
Last weeks Commission forecast estimated that Greeces public debt would hit 135.4 per cent of GDP in 2011, a level for which there is no precedent since the euros creation in 1999.
“The Commission identifies five countries as at particular risk Greece, Ireland, Latvia, Spain and the UK because their public finances will come under strain from large increases in pension and healthcare costs, and high deficits triggered by the financial crisis.”
Hey guys, here’s an idea, how about you import millions of people from the Middle East and North Africa. Those people will be so honored to live in Europe that they will gladly pay the healthcare and pension costs for you people as you age.
Wonderful idea - and they still think that.
Italy should’ve been on this list, as well.
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