ABSTRACT
Like the US and Japan, the EU is getting older. The dramatic aging of EU societies portends enormous fiscal stresses as the costs of paying pension and health care benefits promised to the elderly require ever higher payments from workers. Economic projections and measurement have reached the point where countries can easily do generational accounting and fiscal gap analysis In contrast to 'official' debt, generational accounting poses and answers an economic question, namely 'What is the net tax burden facing future generations assuming current generations pay no more in net taxes than current policy suggests.' The signatories took it for granted that the deficit was a well-defined economic concept and a true indicator of the sustainability of a country's fiscal finances. The fiscal gap is a closely related measure of long-term fiscal imbalances. Accurately assessing the true size of long-term fiscal imbalances of a nation provides an early warning system of explicit or implicit default.
