Report on the Long-term Sustainability of Public Finances (December 2012)
The long-term sustainability of public finances has become a key issue against the backdrop of the current problems in the Eurozone. Many countries have adopted measures to curb their growing debts in order to maintain the confidence of the financial markets. It is therefore important to know the risks that are most likely to crop up and affect public finances in the near future. These include, in particular, the impact of population ageing and of the general government’s implicit liabilities which are not yet reflected in the current public debt amount. The report seeks to answer the following questions: “What risks does the application of existing policies pose for the future?” and “What additional effort is needed to make public finances sustainable in the long run?”
The report presents the new long-term sustainability indicator, which should become the main yardstick against which the government’s fiscal policy is evaluated. The indicator is used to quantify the additional consolidation effort needed to prevent the general government debt from exceeding the upper limit defined in the Fiscal Responsibility Act (50% of GDP) over the next 50 years.
All long-term projections involve a degree of uncertainty. Nevertheless, long-term sustainability studies are relevant particularly when it comes to considering possible changes in areas such as pension systems or healthcare. The ambition of the report is to enrich public discourse and ensure that the measures adopted in the parliament take due account of the fiscal burden passed on to future generations.