Setting targets for government budgets in the pursuit of intergenerational equity
The Stability and Growth Pact (SGP) adopted in 1997 originally set budget balance as the medium-term objective (MTO) for all EU Member States, to create a safety margin under the 3% of GDP deficit ceiling. In a reform in 2005, MTOs were made country-specific and dependent on initial debt and the potential growth rate. They were agreed for a transition period, until the criteria for taking into account implicit pension liabilities under ageing populations were established. Preparations for this are currently (early 2009) ongoing. Against this backdrop, this paper explores possible benchmarks for setting MTOs under alternative rules for the public pension system, based on the principle of â€˜actuarial neutrality across generations'. The effects of privatisation of the mandatory pension system are spelled out. The ongoing revision of the national accounts will establish new accounts for the (implicit) pension liabilities of governments. This will allow targets to be set for explicit and implicit government debt in the light of intergenerational equity. One of the conclusions to emerge from current trends and policies is that reassessing the generosity of public pensions, especially the generously low retirement age in Europe, will remain high on the political agenda, as otherwise the burden to be shouldered by future generations will continue to increase.
|Date of creation:||Apr 2009|
|Date of revision:|
|Contact details of provider:|| Postal: |
Fax: +32 2 298.08.23
Web page: http://ec.europa.eu/economy_finance/index_en.htm
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Guido Tabellini, 2003. "Principles of Policymaking in the European Union: an Economic Perspective," Levine's Working Paper Archive 506439000000000157, David K. Levine.
- Sinn, Hans-Werner, 2004.
"The pay-as-you-go pension system as fertility insurance and an enforcement device,"
Munich Reprints in Economics
19606, University of Munich, Department of Economics.
- Sinn, Hans-Werner, 2004. "The pay-as-you-go pension system as fertility insurance and an enforcement device," Journal of Public Economics, Elsevier, vol. 88(7-8), pages 1335-1357, July.
- Sinn, Hans-Werner, 2004. "The pay-as-you-go pension system as fertility insurance and an enforcement device," Munich Reprints in Economics 938, University of Munich, Department of Economics.
- Wyplosz, Charles, 2002. "Fiscal Policy: Institutions versus Rules," CEPR Discussion Papers 3238, C.E.P.R. Discussion Papers.
- Roel Beetsma & Heikki Oksanen, 2007.
"Pension Systems, Ageing and the Stability and Growth Pact,"
CESifo Working Paper Series
2141, CESifo Group Munich.
- Roel Beetsma & Heikki Oksanen, 2007. "Pension Systems, Ageing and the Stability and Growth Pact," European Economy - Economic Papers 289, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
- Jonas Fischer & Lars Jonung & Martin Larch, 2007.
"101 Proposals to reform the Stability and Growth Pact. Why so many? A Survey,"
European Economy - Economic Papers
267, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
- Larch, Martin & Jonung, Lars & Fischer, Jonas, 2008. "101 proposals to reform the Stability and Growth Pact. Why so many? A survey," MPRA Paper 20592, University Library of Munich, Germany.
- Barry Eichengreen & Charles Wyplosz, 1998. "The Stability Pact: more than a minor nuisance?," Economic Policy, CEPR;CES;MSH, vol. 13(26), pages 65-113, 04.
- Jean Pisani-Ferry, 2005. "Fiscal policy in EMU: towards a sustainability and growth pact," Working Papers 52, Bruegel.
- Laurence J. Kotlikoff, 2001.
NBER Working Papers
8163, National Bureau of Economic Research, Inc.
- Bosworth, Barry & Burtless, Gary, 2004. "Pension Reform and Saving," National Tax Journal, National Tax Association, vol. 57(3), pages 703-27, September.
- Blanchard, Olivier J & Giavazzi, Francesco, 2004. "Improving the SGP Through a Proper Accounting of Public Investment," CEPR Discussion Papers 4220, C.E.P.R. Discussion Papers.
- Heikki Oksanen, 2004. "Pension reforms: an illustrated basic analysis," European Economy - Economic Papers 201, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
- Peter Whiteford & Edward Whitehouse, 2006. "Pension Challenges and Pension Reforms in Oecd Countries," Oxford Review of Economic Policy, Oxford University Press, vol. 22(1), pages 78-94, Spring.
- Roel Beetsma & Heikki Oksanen, 2008. "Pensions under Ageing Populations and the EU Stability and Growth Pact ," CESifo Economic Studies, CESifo, vol. 54(4), pages 563-592, December.
- Oksanen, Heikki, 2005. "Public pensions in the national accounts and public finance targets," Journal of Pension Economics and Finance, Cambridge University Press, vol. 4(03), pages 291-312, November.
- Benoiˆt Coeure´ & Jean Pisani-Ferry, 2005. "Fiscal Policy in Emu: Towards a Sustainability and Growth Pact?," Oxford Review of Economic Policy, Oxford University Press, vol. 21(4), pages 598-617, Winter.
- Paul van den Noord & Richard Herd, 1993. "Pension Liabilities in the Seven Major Economies," OECD Economics Department Working Papers 142, OECD Publishing.
When requesting a correction, please mention this item's handle: RePEc:euf:ecopap:0358. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ECFIN INFO)
If references are entirely missing, you can add them using this form.