Public Finances – the Difficult Path Back to Sustainable Levels

Abstract

In order to curb falling output and employment resulting from the financial crisis, extensive monetary and fiscal measures were put in place by authorities the world over. Many governments also recapitalised banks to strengthen their financial position. Combined with lower tax revenues and higher spending, partly related to social security payments, this has led to substantial fiscal deficits and a marked increase in public debt as a percentage of GDP in most advanced economies.