Should fiscal consolidation rank high on the policy agenda?
The target of balancing the general government budget was reached in 2001, one year earlier than originally scheduled. This was achieved mainly via revenue increases, without much spending restraint. In 2002 a small deficit re-emerged, totalling 0.2 per cent of GDP on account of slower growth. Other factors affecting the outturn were largely offsetting. Expenditures were driven up by extra spending on account of the 2002 summer flooding and new demands, notably a substantial increase in family benefits, rising outlays on account of subsidised part-time employment for older people, and an investment stimulus package. On the other hand, ongoing administrative reform curbed spending. This is mainly reflected in flat outlays for active personnel. Largely reflecting the impact of past decisions, the deficit is set to rise in 2003. Public sector reform, including further reform of the social security system, continues to rank high on the government’s policy agenda and will be needed to move
