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MNI BRIEF:ECB Fears Structural Shift Higher In Fiscal Deficits

Demographic and climate change will push eurozone fiscal deficits higher, the ECB fears.

Demographic ageing, the end of the peace dividend, digitalisation and climate change could widen the euro area’s average fiscal deficit by approximately a further 3% of GDP in the decades ahead unless action is taken, the European Central Bank said in its Economic Bulletin on Wednesday.

Even without taking into account digitalisation, “achieving a government debt-to-GDP ratio of 60% by 2070 from today’s debt levels would require euro area governments to immediately and permanently increase their primary balances by 2% of GDP on average,” the article said. (See MNI: Multi-Year Fiscal Plans For EU States Delayed Until Autumn- Officials)

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Demographic ageing, the end of the peace dividend, digitalisation and climate change could widen the euro area’s average fiscal deficit by approximately a further 3% of GDP in the decades ahead unless action is taken, the European Central Bank said in its Economic Bulletin on Wednesday.

Even without taking into account digitalisation, “achieving a government debt-to-GDP ratio of 60% by 2070 from today’s debt levels would require euro area governments to immediately and permanently increase their primary balances by 2% of GDP on average,” the article said. (See MNI: Multi-Year Fiscal Plans For EU States Delayed Until Autumn- Officials)

Keep reading...Show less