RESOURCE ALERT: Financial Assistance to EU Member States “State of Play”

SOURCE: European Parliament DG for Internal Policies, European Commission DG ECFIN

PREVIEW: The European Parliament Economic Governance Support Unit (DG Internal Policies) has put out a “state of play” table tracking the status of the financial assistance packages receives by EU MS.

In another paper from the same unit, an overview of the recent developments and discussion surrounding the ESM is offered. Besides a large number of topical links, the report also has an annex comparing EFSM, EFSF and ESM.

Meanwhile, the European Commission has looked at the effects of austerity. In a September paper by DG ECFIN, the authors assess the response of the debt-to-GDP ratio to the fiscal consolidation efforts envisaged in the 2013 Stability and Convergence Programmes in Member States, under different assumptions on the underlying fiscal multipliers. In fairly technical terms, the paper then compares the consolidation effects against a baseline, no-consolidation scenario.

The paper concludes that, despite the counterintuitive effects of consolidation – namely short-term increases in the debt ratio – consolidation is needed, as the “debt dynamic in absence of policy intervention is in many cases quite steep and further debt increases would raise the likelihood of a self-defeating dynamics in the future.”

The aforementioned short-term increases in the debt ratio (relative to baseline) following consolidation could take place for a group of countries expected to experience high fiscal multipliers, including Belgium, Cyprus, France, Greece, Italy, Ireland, Portugal, Slovenia and Spain, the authors say.

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