In the ten years preceding the crisis, current expenditure, net of interest on the public debt, grew by 4 per cent per year in nominal terms, far outpacing GDP. Last September’s Public Finance Decision forecasts that its increase will be limited to 1 per cent per year in 2011–12.
This trend must continue beyond 2012 and the composition of primary expenditure must be geared to growth. There is no other way to reduce the deficit, since the burden of taxes and social security contributions is already 3 points above the euro-area average.