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2009 OECD Economic Surveys: Euro Area 2009

image of OECD Economic Surveys: Euro Area 2009

This edition of OECD's periodic survey of the Euro Area economy finds a slowing economy, receding inflationary pressures and financial market turmoil  The survey focuses of key challenges being faced including financial market stability, fiscal policy, and financial integration, innovation and the monetary policy transmission mechanism. An annex looks at wealth effects on household consumption.

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Fiscal policy

The budgetary position has improved in recent years against the background of buoyant revenue growth. However, revenue growth is faltering as activity eases, while durable progress towards fiscal sustainability has been limited. Moreover, some countries continue to experience large underlying deficits and rising debt. The downturn will lower revenues and there is pressure on the cost of borrowing for some countries. Some governments have used fiscal policy to cushion the economic slowdown. Fiscal sustainability should remain a priority. Moreover, by improving the quality of public finances the euro area authorities can contribute more to raising living standards. This involves a better design of tax policies and greater focus on public sector efficiency.

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