The government deficit is projected to reach 9.6% of GDP in 2010.
Fiscal policy should remain neutral in 2010. Small financial intermediaries with solvency problems should be allowed to fail, which would limit the fiscal costs of interventions. Programmes to support construction of social housing should be halted: support to low-income households should be provided via means-tested cash benefits earmarked to the housing costs. Scope for the savings banks to raise equity from private external sources should be expanded and barriers to mergers removed.
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©OECD Observer No 274, July 2009