With rising unemployment, wage growth is expected to slow considerably. Consumer price inflation is also expected to continue to ease, though it will stay above the euro area level.

Due to the cyclical decline in tax revenues and the increase in social spending, as well as two fiscal stimulus packages, the government budget deficit is set to widen considerably this year and next. A rapid return to fiscal consolidation over the medium term is essential to ensure the sustainability of public finances.

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©OECD Observer No 274, July 2009