A significant decline in investment, particularly in civil engineering projects and housing, due to dearer and scarcer sources of funds and uncertainty about the timing of a global recovery, will drag the economy.
A relatively favourable fiscal position prior to the crisis gave room for discretionary fiscal stimulus. However, any new fiscal package should avoid measures that may jeopardise long-term fiscal sustainability. The credibility of fiscal policy needs to be bolstered by a new pension reform that deals with rising prospective ageing costs.
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©OECD Observer No 274, July 2009