Unemployment is set to reach double digits by 2010 and inflation will be low but persistently above the euro area average.

Public finances are set to worsen further this year, despite consolidation efforts by the government, as the recession hits activity. The high public debt and continuous fiscal slippages limit the room for discretionary fiscal stimulus. A strong commitment to enhance fiscal viability is imperative to restore market confidence and bring sovereign interest rate spreads to their pre-crisis levels. Sustained consolidation hinges upon strict control of spending, broadening of tax bases and curbing tax evasion. Additional reforms in the pension and health care systems are also essential.

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©OECD Observer No 274, July 2009