Overall fiscal balance 1999 1.6 2000 1.3

Primary fiscal balance 1999 5.8 2000 5.8

Cyclical component of the budget balance shows the effect on the budget balance of the output gap , as estimated by the European Commission .

Chart A Fiscal developments , 1998 2007 ( as a percentage of GDP ) budget balance cyclically adjusted budget balance 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Sources European Commission ( AMECO database ) and ECB calculations . Note Budget balance figures exclude proceeds from the sale of UMTS licences .

Non cyclical changes in the government budget balance have , on average , had a broadly neutral impact on the balance .

Non cyclical changes in the government budget balance had a positive impact on the balance , in particular in 2002 .

Deficit debt adjustments , reflecting among other things financial transactions which leave the deficit unaffected but have an impact on debt , exerted an upward effect of 0.3 percentage point on the euro area average debt ratio in 2000 .

on the contribution of fiscal consolidation efforts as reflected in the primary balance

G L O S S A RY Cyclical component of the budget balance shows the effect on the budget balance of the output gap , as estimated by the European Commission .

Note Budget balance figures exclude proceeds from the sale of UMTS licences .

Subsequently , non cyclical factors contributed to a deterioration of the budget balance in 1999 , while they helped to improve the balance in 2000 and 2001 .

Accordingly , the general government budget balance recorded a deficit in each year throughout that period .

However , the fiscal position benefits from a strong economy , with the structural balance probably being in a slight deficit position .

( b ) On the basis of primary fiscal balances ( as a percentage of GDP )

These budgetary developments were mainly the result of strong output growth and revenue windfalls and , only to a small extent , effective fiscal consolidation .

Greece Potential future debt ratios under alternative assumptions for fiscal balance ratios ( as a percentage of GDP )

Sweden Potential future debt ratios under alternative assumptions for fiscal balance ratios ( as a percentage of GDP )

was close to zero and that in the near future economic conditions would continue to exert a positive influence on the budget balance .

In the area of economic policy , the Commission produces Integrated Guidelines for Growth and Jobs , containing the Broad Economic Policy Guidelines and the Employment Guidelines , and reports to the EU Council on economic developments and policies . It monitors public finances within the framework of multilateral surveillance and submits reports to the EU Council .

Keeping this in mind , both the operation of automatic stabilisers and the expansionary fiscal stance adopted in the euro area countries are assessed to have had a sizeable negative impact on the budget balance .

Compared with the previous year , the fiscal balance has improved by 1.3 percentage points and the debt ratio has decreased by 6.4 percentage points .

The third article examines the differences between the government budget balance and the change in government debt in the euro area .

Deterioration of budget balances in 2001 The average budget balance in the euro area deteriorated in 2001 for the first time since 1993 .

The structural primary budget balance, the International Monetary Fund s preferred measure of fiscal thrust, tightened by an additional 1 1.5 of GDP each year from 2010 to 2012, after which it remained broadly stable.

Net

Net

Net I.

The most commonly used measures of effective exchange rates employ trade weights . Elderly dependency ratio shows the proportion of the population of a country aged 65 and over in comparison with the population aged 15 64

FISCAL POLICIES Fiscal policies in the non euro area EU Member States continued to be heterogeneous in 2006 .

constant primary balance

The demographic trend over the next few decades will have an adverse effect on the current surpluses in the pension system , thereby making improvements in the general government fiscal balance essential .

European Commission estimates suggest only a marginal improvement in the cyclically adjusted primary balance to GDP ratio ( i.e. the budget balance excluding government debt interest payments and corrected for cyclical influences ) for the euro area as a whole in 1999 .

Budget balance ratios remained broadly stable in Belgium , Ireland and Portugal between 1998 and 1999 , whereas more significant progress was made in the remaining countries with the exception of Luxembourg , where the budget surplus to GDP ratio declined .

During the 1990s a pattern of initially sharply deteriorating and subsequently improving outturns can be observed in the budget balanceto GDP ratio .

Compared with the previous year , the fiscal balance has improved by 1.4 57 percentage points , moving into surplus , while the debt ratio has fallen by 5.5 percentage points .

Moreover , the demographic trend over the next few decades will have an adverse effect on the current surpluses in the pension system , thereby making improvements in the general government fiscal balance essential .

extra extra extra Net

extra extra extra Net II .

These projections show a slower improvement in the general government budget balance position than envisaged in the previous programme , although the new target for the budget balance in 1998 is somewhat more ambitious and a more favourable development of the debt ratio is now expected .

Moreover , the demographic trend over the next few decades will have an adverse effect on the current surpluses in the pension system , thereby making further improvements in the general government fiscal balance essential .

This gave rise to considerable ex post revisions of estimates of both the output gap and the cyclical component of the budget balance ( see Chart B , right hand panel ) .

During the 1990s a pattern of initially sharply deteriorating and subsequently improving outturns can be observed in the budget balance to GDP ratio .

As is shown in greater detail in Chart 3b , European Commission estimates indicate that cyclical factors have had only a relatively small impact on the change in the fiscal balance in recent years .

under both the monetary pillar and the economic and fiscal pillar .

As is shown in greater detail in Chart 3b , European Commission estimates indicate that cyclical factors contributed negatively to the change in the fiscal balance , in particular in 2001 and 2003 .