If inflation expectations are to be kept as low as possible and the appropriate underlying conditions for a stability-oriented monetary policy secured, deficit and debt ratios need to be low. Sound public finances also ensure that national fiscal policy remains flexible even in times of cyclical downturns.
This room for manoeuvre becomes even more important for the participants in a monetary union since they no longer have recourse to the instrument of exchange rate adjustments. With regard to the criteria on the sustainability of public finances, the countries made improvements by and large up to last year.