Phasing-in plan on the transitional measures on risk-free interest rates and on technical provisions

Requirement of a close to balance or in surplus position || Country specific MTO in structural terms: - Provide a safety margin with respect to the 3% deficit limit - Ensure rapid progress towards sustainability - Allow room for budgetary manoeuvre For euro area and ERMII MS: limits of -1% of GDP Expenditure benchmark: expenditure net of discretionary measures should grow ≤ medium-term potential GDP || 0.5% GDP as a benchmark: - More in good times - Less in bad times >0.5% if debt above 60% or if pronounced sustainability risks Temporary deviation from the adjustment path allowed if: - Implementation of major structural reforms with a ve ...[+++]rifiable impact on the long-term sustainability of public finances – emphasis on pension reform - Unusual event outside the control of the MS concerned with a major impact on its financial position - Severe economic downturn for the euro area or the EU as a whole provided this does not endanger medium term fiscal sustainability || Procedure for correcting significant deviation (0.5% in one year or cumulatively over 2 years from the MTO or the adjustment path it) For euro area: financial sanctions in case of repeated non-compliance (interest-bearing deposit of 0.2% of GDP)

The enhanced macroeconomic stability has allowed for a decreasing trend in interest rates in the last few years, contributing to high domestic credit growth and consequently to rapid growth of investment and consumption.

– (FR) Madam President, we can all measure the positive economic impact of the birth of the euro, and I am thinking in particular of the general easing of interest rates and the abolition of risk premiums, from which all European countries are benefiting.

An increase in interest rates generates a nominal holding gain for the issuer of the bond and an equal nominal holding loss for the holder of the bond, and vice versa in the case of a fall in interest rates.

However, as bills are short-term securities with much shorter times to maturity, the holding gains generated by interest rate changes are generally much smaller than on bonds with the same face values.