By consecutively applying the EU’s debt sustainability analysis through 2052, we find that EU countries must improve their primary balances during the initial four-to-seven-year adjustment period starting in 2025 and then maintain these balances at broadly stable levels. However, in most countries, fiscal adjustments in the non-ageing portion of the budget must continue and reach historically high levels. Risk factors may necessitate even greater adjustments, while policies could partially alleviate fiscal pressures. The implementation of EU country-specific recommendations related to labour markets, pension systems, and productivity has been limited, and these recommendations do not adequately address immigration and fertility-enhancing policies.

This paper investigates whether there have been time periods between 1999 and 2019 in Hungary when government spending has been self-financing, i.e., when the government has faced a fiscal free lunch. By self-financing, it is meant that government spending, initially financed by issuing bonds, does not lead to an increase in the debt-to-GDP ratio due to improvements in the budget balance resulted in by stimulated economic activity. Some macroeconomists think that while government spending is arguably not self-financing in normal times, it could have become self-financing in the United States (US) during the Global Financial Crisis (GFC) due to 1) stronger fiscal multipliers, 2) stronger hysteresis effects, and 3) lower interest rates than usually. This paper estimates the parameters of a simple model of debt dynamics on Hungarian data to study whether these arguments also hold for an emerging small open economy, like Hungary, in which fiscal multipliers are thought to be weaker, and where interest rates increased during the GFC. It is found that government spending has not been self-financing in the short run before the GFC (1999Q1–2008Q3), has been at the edge of being expected to be self-financing in the long run, but has not actually turned out to be. During the GFC (2008Q4–2012Q4), it cannot be excluded to have been self-financing in the long run, and might have already been self-financing in the short run, as well. However, these findings are much less robust than those for the US. Between the GFC and the COVID recession (2013Q1–2019Q4), government spending was not self-financing in the short run, but was expected to be self-financing in the long run.

This paper develops a model of immigration that encompasses different channels through which immigra tion impacts native wages. The framework incorporates a frictional labor market with different outside options for immigrants and natives, local demand conditions captured by relative prices, and capital-labor substitution. The model is calibrated on labor data for the four largest European Union economies, France, Germany, Italy and Spain. Three counterfactual scenarios are explored, where the adjustment speed of the capital stock and the sensitivity of domestic relative prices to immigration differ. Results shows that the impact of immigration on wages and wages inequality depends crucially on the latter factor, i.e. whether relative prices are determined by local vs. global conditions. In the former case, the migration pattern observed in the data has led to a non-negligible increase in native wage inequality. In the latter case, migration skewed towards the low-skilled has led to a (quantitatively small) decrease in native wage inequality, due to the lower wage bargaining power of immigrants who compete with native workers.