The Sustainability of Public Finances in Belgium: Regional, Federal and EU Perspectives Per Eckefeldt European Commission BEL-DEBT Project CEPS, Brussels, 24 February 2014 The views expressed herein are those of the individual authors and do not necessarily reflect the views of the European Commission.
Short-term risk for fiscal crisis (S0 indicator) Risks markedly reduced since 2009 in the EU and BE 2009 2013 Fin.-comp. index 2009 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 MT BG HU PL SE RO EE DK FI LU AT LV High risk CY ES SK LT SI UK BE IT CZ NL 0 DE FR 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 Fiscal index 2009 Low risk 2
Gov debt prospects: BE (autumn 2013 forecasts) Rather stable baseline debt developments: some uncertainty Short-term budgetary outlook challenging, but risks manageble in view of past practice in BE (% of GDP) 110 108 106 104 102 100 98 96 94 Stochastic debt projections 2014-18, BELGIUM 92 2011 2012 2013 2014 2015 2016 2017 2018 09% 08% 07% 06% 05% 04% 03% 02% 01% 00% 3-Year average level of Structural Primary Balance (1998-2012) - Probability distribution AVG 03-12 SPB for BE had a percentile rank of 24% 2015 SPB for BE has a percentile rank of 32% Less -4.5-4 -3.5-3 -2.5-2 -1.5-1 -0.5 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 5.5 6 6.5 More p10_p20 p20_p40 p40_p60 p60_p80 p80_p90 p50 gdebt_gdp_dsm 3
Fiscal sustainability gaps in the medium/longterm: significant challenges in BE 3 Components: CoA=cost of ageing DR= Debt ratio IBP= Initial Budgetary position 4
Medium/long-term Gov t debt BE and EA (autumn 2013 forecasts) projections: Government debt very high in the EA and BE, but attaining and keeping balanced budgets (MTOs) would set it on a clear downward path towards 60% of GDP (% of GDP) 160 140 120 100 80 60 40 20 0 1990 1992 (% of GDP) 140 120 100 80 60 40 20 0 Gross debt as % of GDP - BELGIUM - Medium term debt projections 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 Gross debt No-policy as % change of GDP scenario - EURO AREA - Medium term debt projections Shock -1p.p. in the short-term/long-term interest rate on maturing and new debt from 2015 Shock +1p.p. in the short-term/long-term interest rate on maturing and new debt from 2015 Consolidation scenario (0.5% per year on SB) in order to achieve MTO Consolidation scenario (1% per year on SB) in order to achieve MTO Constant average 1998-2007 interest (on new & maturing debt)/growth rates differential Combined constant historical scenario (last 10y avg on GDP growth, IR & SPB) 2030 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 No-policy change scenario Shock -1p.p. in the short-term/long-term interest rate on maturing and new debt from 2015 Shock +1p.p. in the short-term/long-term interest rate on maturing and new debt from 2015 Consolidation scenario (0.5% per year on SB) in order to achieve MTO Consolidation scenario (1% per year on SB) in order to achieve MTO Constant average 1998-2007 interest (on new & maturing debt)/growth rates differential Combined constant historical scenario (last 10y avg on GDP growth, IR & SPB) 5
Background slides
The Two Pack: A new step in the reform of economic governance European Semester 1 st edition in Spring 2011 EU27 Integrated surveillance Six Pack in force since December 2011 EU27 Major reforms for economic governance in the EU (fiscal and macroeconomic surveillance) International Treaty (TSCG) in force since January 2013 EA + 8 Fiscal Compact to mirror EU rules at the national level Two Pack entry into force 30 May 2013 EA only Better surveillance and coordination framework
The Two-Pack: What does it change for euro area surveillance? Enriching the European cycle of surveillance of Member States' public finances Increased EDP monitoring NEW Autumn Presentation of draft budgetary plan for following year Opinion by the Commission Overall assessment Discussion by Eurogroup End of Year Budget Law - Regular reporting (possibility of a COM recommendation in case of risk of missing deadline for correction) - Economic partnership programme + European Semester Spring Presentation of medium-term fiscal and economic policy plans Assessment of compliance with preventive arm of SGP Macroeconomic surveillance Policy guidance and recommendation INTRODUCED IN 2011 Increased national ownership and transparency - Independent forecasts for budgetary planning - Independent bodies to monitor fiscal rules (fiscal councils)
Why a COM opinion on the DBP? Main recipients: National Parliaments and authorities Why an opinion? To inform national debate with an independent assessment National Parliaments can ask the Commission to present its opinion To reinforce the relevance of the EU guidance along with national ownership of EU rules No Veto (the Opinion is not binding!) The NP retains full sovereignity!
European surveillance increasing transparency Annual cycle of surveillance provides independent inputs in the national policy debate: Macroeconomic forecasts underlying the draft budgets and medium-term fiscal plans prepared or endorsed by independent bodies Every spring: European Semester. Countries submit their medium-term Stability and Convergence Programmes Council issues public recommendations Every autumn: euro area draft budgetary plans made public Commission opinion on draft budgetary plans made public and presented to national parliaments and/or European parliament at their request Input into national debates No change to sovereignty of national parliaments