Assessing Public Debt Sustainability in EU Member States: A Guide

Abstract:
Analysing recent and prospective public debt developments and risks to debt sustainability is crucial for EA countries and the EU as a whole to be able to formulate appropriate policy responses. To this aim, the Commission services (Directorate General for Economic and Financial Affairs) conduct, on a regular basis, detailed public debt sustainability analysis.

Aim of this paper is indeed to illustrate the methodological approach used by the Commission to carry out, in a systematic and harmonised way, debt sustainability analysis for EU countries. The toolkit used encompasses traditional (deterministic) public debt projections, accompanied by sensitivity analysis, and stochastic debt projections. Brand new tools have recently been integrated in the framework to ensure a more comprehensive assessment of risks to public debt sustainability (capturing risks arising, for instance, from the structure of public debt financing and from government's contingent liabilities). The paper provides an accurate description of all the analytical and reporting tools included in the European Commission's debt sustainability analysis framework.

European Commission: DG Economic and Financial Affairs: European Economy: Occasional Paper No. 200, August 2014: Assessing Public Debt Sustainability in EU Member States: A Guide http://ec.europa.eu/economy_finance/publications/occasional_paper/2014/op200_en.htm

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