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I would like to thank Carlos Carceres, Xavier Debrun, Kevin Fletcher, Martine Guerguil, Anne-Marie Gulde-Wolf, Catriona Purfield, the country team as well as the authorities for very useful discussions and support. Petra Dacheva provided excellent research assistance.
See European Council 24/25 March 2011 Conclusions, available at http://www.european-council.europa.eu/council-meetings/conclusions.aspx (April 5, 2011).
This section does not discuss the deficit and expenditure ratio ceilings introduced by the authorities given that they do not provide binding guidance over the economic cycle and thus not the kind of rules that can meaningfully be assessed with the above criteria. However, the deficit ceiling is consistent with the objective of debt sustainability.
In the simulations, a historic average of 1.1 for revenue buoyancy in response to the output gap is used.
Capital expenditures accounted for 4.9 percent of GDP on average in 2001-10, and grants for 1.8 percent.
However, the authorities have contemplated subjecting direct tax rates to a parliamentary supermajority, which would curtail their discretion for policymaking through revenue measures.