Key developments and challenges

Fiscal discipline has been improved. The government has made good progress in bringing headline public deficits back within the limits mandated under European treaties.

Overly generous social benefits have been capped. These steps have been taken along with much-needed changes to entitlements in the state pension system.

The authorities have reached an agreement with the banking industry on restructuring foreign currency-denominated mortgages. This is a significant step in finding a balanced solution to this long-running problem, though the scheme that allowed borrowers to pre-pay outstanding foreign currency mortgages at discounted exchange rates led to a considerable capital loss in the banking system.