Crisis Talk - The World Bank Group

Public Finances in the EU

A new report by the European Commission has painted a bleak picture of what is to come. Deficits in nearly all EU countries. And that is coupled with GDP growth forecasts that are oddly lagging by 3-4 months. In other words, the picture will be bleaker.

France reported last week that the deficit is expected to be 7% of GDP. This report says 6.6%. Not too far off.

Reading the report, one thought comes to mind: European citizens may expect higher taxes soon.

Time for the Tax Experts

A new report from Citigroup Global Markets (subscription required) titled Out of the Frying Pan? Fiscal Vulnerability Takes Centre Stage argues that the global financial crisis has moved into its third stage. First there was a financial vulnerability phase, in which countries with high loan/deposit ratios suffered, and this was followed by (and overlapped with) an external vulnerability phase. In this second phase, countries with high external financing needs suffered the most. Fortunately, they have been buoyed by a combination of an increased supply of finance - in large part through a ramped up IMF - and a decline in demand for external finance through improved current account balances.