Debt sustainability analysis : assessing its use in the EU's new fiscal rules

A large share of euro area member states is highly indebted. On average, their debt ratios have experienced a strong and continued upward trend that needs to be reversed. The debt sustainability analysis in the new fiscal rules provides great flexibility to member statesbut exhibits weaknesses with regard to transparency, robustness and credibility. Stress testing needs to be enhanced and applied to the adjustment period. This document was provided/prepared by the Economic Governance and EMU Scrutiny Unit at the request of the ECON Committee.