Central European states face dual fiscal challenge

Budapest
Central European cities such as Budapest have benefitted from the boost in infrastructure spending that EU funds have supported (source: dpa)

  • EU funding for Central European economies will likely fall in the next decade
  • Meanwhile, the ratio of elderly to working-age people will rise sharply
  • This will put a huge strain on Central European budgets, jeopardizing growth
  • Careful planning can help to overcome the challenge, but it is unlikely to happen

At the beginning of the next decade, many countries in Europe may face a fiscal double whammy. They risk losing access to much of the generous European Union funding that currently supports infrastructure investments, and they will have to bear the burden of rising health-care spending, due to aging populations. If they are unable to deal with these challenges, their economic growth could suffer.

Each year, the EU’s Central European member states receive transfers equal to about 2 percent of their gross domestic product (GDP) in the form of cohesion and structural funds. That may not look like a big amount, but it is crucial to their economies.

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