Fiscal Challenges in the Euro Zone


  • I am grateful to Takatoshi Ito, Sahoko Kaji, and Kazuo Ueda, the Editors of the Asian Economic Policy Review (AEPR), and participants in the “Fiscal Policy and Sovereign Debt” AEPR Conference for their helpful comments. I also wish to thank Luis Esteve for excellent research assistance.

Correspondence: José Manuel Campa, Camino del Cerro de Aguila 3, 28023 Madrid, Spain. Email:


Fiscal challenges in the Euro zone have been at the center of global economic concern in the last 2 years. Despite lower debt burdens, and higher fiscal efforts taken by Euro countries, a perception of high fiscal risk remains. This paper reviews the fiscal challenges facing the Euro area countries and the measures taken at the Euro area level to manage short-term pressures and to enhance long-term functioning of the area, as well as the main lines of national specific reforms. The paper shows the unique characteristics of the Euro area that still raise concerns to foster stability and the challenges to address them.