Looking beyond the short term, one of the important tasks for economic policy is to keep the public finances on a sound footing, which could provechallenging if growth should remain weak over the medium term. Fiscal management faces three major challenges. The first relates to the implementation of federal fiscal policy. Because of the difficulties encountered in implementing the new debt containment rule in 2003, the government has had to adjust its financial plan to restore its accounts to structural equilibrium in the medium term. A number of lessons should be drawn from the initial application of the debt containment rule in order to improve this new budgetary framework. The second challenge concerns the reform of the pension system. Adjustments are still needed to ensure the long-term financial viability of the basic old-age and invalidity pension systems, while the financial market slump also necessitates reforms of the (second pillar) occupational benefit plans which are funded schemes. Third, the public sector must pursue its efforts to improve efficiency. These will pay off not just for general government, whose financial resources will probably not grow fast in the medium term, but also for the private sector which should benefit from improved services...