Fiscal Challenges Facing the New Member States
Comparative Economic Studies (2006) 48, 252-276.
This paper provides an analysis of the fiscal challenges faced by the eight transition economies, which joined the European Union (EU) in May 2004. More than half of them run excessive fiscal deficits being partly a legacy of an early transition period, partly - a consequence of additional accession-related costs. In addition, the long-term fiscal outlook, connected with the consequences of population ageing, is dramatic. On the other hand, the perspective of Economic and Monetary Union entry should provide the new member states with a strong incentive to reduce their deficits now because waiting (and postponing both fiscal adjustment and the adoption of the euro) will only result in higher cumulative fiscal costs.
This paper draws on the results of a CASE research project on Strategies for joining the European Economic and Monetary Union: A Comparative Analysis of Possible Scenarios coordinated by Marek Dabrowski and Jacek Rostowski and financed by Poland's Scientific Research Committee (Grant No. 2 H02C 029 23).