Germany: Bundesbank Monthly Report: The state of public finance in the EU acceding countries

Upon their accession to the European Union on 1 May 2004, the ten new member states will also take over the EU's fiscal policy framework, in particular the provisions on budgetary discipline. Although nine acceding countries are currently below the debt ceiling of 60% of gross domestic product (GDP) laid down in the Maastricht Treaty, the acceding countries' budget deficits are for the most part still well above the ceiling of 3% of GDP. The fiscal policy situation varies considerably across the individual acceding countries: whilst it appears to be relatively favourable in the Baltic states and in Slovenia, the other countries still have to make considerable progress towards consolidation. This article outlines the current situation of public budgets in the acceding countries and examines aspects of the long-term sustainability of their fiscal position. The combination of structural reforms and continuing high economic growth may help to lastingly solve the acceding countries' budgetary problems, some of which are quite considerable. In this respect, the fiscal effects of accession, above all the financial linkage to the EU budget, are likely to have positive consequences. However, they cannot be precisely gauged at present