Focus on Fiscal Consolidation
The past two decades have seen the development of a worrisome and unprecedented phenomenon – the ballooning of public debt in industrial countries during a period of general peace and economic prosperity. In the past, large but temporary budget deficits arose in response ... extreme circumstances, such as major wars or global economic depression. But these debt problems were transitory, because in their wake, governments tightened their belts and cut back ... spending.
A striking characteristic of modern fiscal imbalances is that they originate ... dramatically increased spending rather than falling revenues.
Economists identify several forces that may be behind these imbalances in industrial countries, including:
• The growth of public pension and social spending. Aging populations in industrial countries are growing dramatically, which means more elderly people to support, much higher health care bills, and a smaller share ... the population to work and pay taxes. These future liabilities dramatically worsen the budget prospects of industrial countries. According ... IMF staff estimates, public pension liabilities in 1994 exceeded 68 per cent ... GDP in all major industrial countries. The situation is even worse when commitments to provide future health care benefits are taken ... account. The bad news conveyed ... these figures is that public pension programs are much more generous than governments are likely to be able to support. Future generations of workers will thus face ... either much higher tax burdens to maintain the levels of benefits or sharply reduced benefits;
• Unemployment benefits;
• The productivity slowdown since the early 1970s;
• Increased exchange rate flexibility since 1973 and growing
• integration of world capital markets, which make it easier for governments to run large budget deficits.
Persistently high levels of government debt are a threat ... economic health. The heavy public debt burdens in most industrial countries make it imperative ... governments to take unpopular and painful... people remedial actions.
Words you may need:
fiscal consolidationукрепление бюджетно-налоговой политики
worrisomeadj вызывающий беспокойство
balooningn раздувание, расширение
transitoryadj временный
in the wake of по следам, по пятам (чего-л.)
to tighten one's beltзатягивать пояс
public pension liabilitiesобязательства по выплате пенсий
imperativeadj настоятельный
painfuladj болезненный
remedialadj (зд.) коррективный
Ex. 10. Open the brackets putting the verbs in the correct form:
Transition economies recently (to make) impressive steps towards reducing fiscal imbalances. Cuts of cash expenditure (to bring) about a decline of fiscal deficits for the CEE countries as a whole to about 4 per cent of GDP in 1995 from 10 per cent in 1994 on average. This was mainly the result of large reductions in enterprise subsidies, military spending, and capital expenditures. Despite these spending cuts, however, outlays for social services (such as schools and hospitals) and social security (to remain) relatively stable, relative to GDP. Over the same period, general government expenditures (to fall) on average to 30 per cent of GDP from 38 per cent. While the economies in transition (to make) solid progress over the past few years toward fiscal consolidation, macroeconomic stabilization (to require) additional reduction of inflation and successful implementation of:
• structural reforms, including reform of the tax system and the public expenditure system;
• improved revenue collection through elimination of loopholes, tax evasion and exemptions, broadening of the tax base;
• greater political leadership of the reform process – especially by formulating long-term fiscal adjustment policies.
Words you may need:
transition economiesстраны с переходной экономикой
on averageв среднем