The paper seeks to examine the degree of convergence achieved by the countries within the monetary union in the area of public finance - especially with respect to budget deficits and public debts. In order to assess whether a lasting improvement in public finance has been attained, it is necessary to carry out an extensive analysis covering the primary budget balance, government consumption expenditure as well as public investment spending. The amount of primary budget balance is a measure of a government's commitment to consistent debt reduction.

When evaluating budget balance it is important to establish whether the reduction in the deficit results from lower government spending or increased income. The consolidation of the expenditure side, as presented in the paper, is based on the level of consumption and investment spending.

Any effort to improve the effectiveness of budget policy should not be restricted to the expenditure side. A rise in government income - mainly tax - would make it possible to balance the budget quickly. However, given the current high tax rates, it does not seem feasible at the moment. On the contrary, the tax system should be reformed in the direction of tax cuts.

The conclusions following from the paper emphasize the need to continue the efforts towards budget balance in order to secure the stability and strength of the euro.