Importance Currently, many EU countries are facing issues of fiscal sustainability as a result of ever increasing social spending. To tackle the issues, the EU devised a methodology for assessing the fiscal suitability indicators. The assessment methodology and indicators are common for each country of the European Union, thus significantly facilitating a comparative analysis of fiscal sustainability in various EU countries. Objectives The objective of the research is to analyze the existing fiscal risks and methods for identifying the instability of the financial system in the EU. Methods The research reviews experience the EU countries have in relation to fiscal risks. I also identify the main risks, which made the EU develop a set of sustainability indicators and their thresholds in order to forecast them. Results Debt burden was found to be the most significant risk. It mainly refers to the national debt since fiscal sustainability is higher at the sub-national level. Population aging costs are another substantial risk. The EU uses a single system of indicators to determine fiscal sustainability. As part of the fiscal sustainability policy, the EU sets thresholds, which apply to each EU country. Conclusions and Relevance The most significant fiscal risks mainly relate to debt burden at the national level and population aging costs. The methods for identifying risks of fiscal sustainability and thresholds are common for each country of the EU.
Keywords: fiscal risks, sustainability, national debt, thresholds
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