Statistical annex  (2 MB)  

Communication from the Commission to the Council and the European Parliament  COM(2003) 283 final

In the Communication on the state of public finances in EMU - 2003, the European Commission calls for a coherent medium-term strategy for the Union, which simultaneously tackles the problem of growing budgetary imbalances and the need to raise growth in line with the Lisbon strategy. The Commission Communication is published at the same time as the fourth annual report on Public finances in EMU prepared by the Directorate General for Economic and Financial Affairs. 

The report is part of Commission efforts to upgrade the analysis and surveillance of fiscal policies in EMU, and to place emphasis on the quality and sustainability of public finances. Moreover, the report marks a further step towards progressively incorporating the candidate countries into the EU framework for budgetary surveillance. 
The report identifies the key budgetary policy challenges as follows:

•  euro area countries with deficits must make continuous progress towards budgetary consolidation in structural terms. In line with the Commission Communication and the European Council’s conclusions an improvement of at least 0.5% of GDP in cyclically adjusted terms each year is necessary in order to achieve the close to balance or in surplus objective.
• well designed budgetary consolidation strategies, which focus on expenditure savings rather than tax increases can have a positive impact on growth, especially if combined with the essential structural reforms identified in the Broad Economic Policy Guidelines and as part of the Lisbon strategy
• there is a risk of unsustainable public finances in almost half of EU Member States in light of ageing populations. To ensure sustainable public finances, Member States with deficits first need to achieve and sustain the SGP goal of budget positions of ‘close to balance or in surplus’. Even if this is achieved, a significant financing gap will remain in many Member States. In closing it, governments should try to avoid raising taxes (especially on labour), and concentrate efforts on reducing age-related expenditure by reforming of pension and health care systems and/or reducing non-age related primary spending.