Public finances and the new economic governance in the European Union

Stanisław Owsiak

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ISBN/ISSN:

978-83-01-19916-6

DOI:

Wydawnictwo:

Wydawnictwo Naukowe PWN

Rok wydania:

2018

Liczba stron:

533

XML:ISBN/ISSN:

ONIX MARC21

Bibliografia:

Owsiak, Stanisław. Public finances and the new economic governance in the European Union. Red. . Warszawa: Wydawnictwo Naukowe PWN, 2018, 533 s. ISBN 978-83-01-19916-6

Bibliografia refWorks:

RT Book, Whole

SR Electronic(1)

A1 Owsiak, S.

T1 Public finances and the new economic governance in the European Union

PB Wydawnictwo Naukowe PWN

PP Warszawa

YR 2018

SN 978-83-01-19916-6

Bibliografia BibTex:

@Book{ 190887, author = "Owsiak, Stanisław", editor = "", title = "Public finances and the new economic governance in the European Union", publisher = "Wydawnictwo Naukowe PWN", year = "2018", address = "Warszawa", isbn = "978-83-01-19916-6" }

Bibliografia endNote:

TY - BOOK

AU - Owsiak, Stanisław

ED -

TI - Public finances and the new economic governance in the European Union

PB - Wydawnictwo Naukowe PWN

CY - Warszawa

PY - 2018

SN - 978-83-01-19916-6

ER -

Netografia (standard APA):

Owsiak, Stanisław. Public finances and the new economic governance in the European Union [baza danych online] Warszawa: Wydawnictwo Naukowe PWN, 2018 [dostęp: 05 05 2024]. Dostęp w Ibuk Libra: https://libra.ibuk.pl/reader/public-finances-and-the-new-economic-governance-in-the-european-union-stanislaw-owsiak-190887.

Unia Europejska, finanse publiczne, ekonomia

This work is an attempt to assess to what extent the new economic governance of the EU helped to discipline public finances in the member states. The poor institutional design of the EU, the authors point out, magnified the negative fiscal effects...

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ISBN/ISSN:

978-83-01-19916-6

DOI:

Wydawnictwo:

Wydawnictwo Naukowe PWN

Rok wydania:

2018

Liczba stron:

533

XML:ISBN/ISSN:

ONIX MARC21

Introduction12
Chapter 1. Practical dimension of research on public finances18
1. Premises for disciplining public finances in the European Union20
2. Measures undertaken by the European Union to discipline public finances23
3. Research thesis26
4. Verification methods28
4.1. A qualitative and quantitative approach28
4.2. Fiscal consolidation as the basic tool for disciplining public finances30
4.3. Budget balance and types of fiscal policy32
4.4. Methods of examining the relationship between budget balance and macroeconomic variables34
4.5. The matter of non-Keynesian effects of fiscal policy during the crisis36
4.6. Method for testing the economic potential of EU countries37
4.7. Convergence or economic divergence in Europe38
5. Time scope of the study39
6. Country selection criteria – case studies41
Chapter 2. Concepts of fiscal consolidation46
1. Definitional difficulties48
2. Controversies over the concept of fiscal consolidation49
2.1. Problem of the starting point of consolidation49
2.2. Choice of consolidation strategy and macroeconomic effects51
2.3. Measuring consolidation54
3. Dilemma regarding the choice of consolidation instruments56
2.4. Criteria for assessing the effects of consolidation56
4. Assessing the sustainability of fiscal consolidation in selected EU countries60
5. Summary64
Chapter 3. Fiscal supervision as an element of new economic governance in the European Union66
1. Treaty bases for coordination of the Member States’ economic and budgetary policies68
2. Evolution of fiscal supervision 1992–200572
3. Fiscal supervision as an element of new economic governance78
3.1. General concept of change78
3.2. New requirements for budgetary frameworks of member states82
3.3. Action undertaken to strengthen the surveillance of budgetary positions and the surveillance and coordination of economic policies84
3.4. Action to speed up and clarify the excessive deficit procedure88
3.5. Enforcement of budgetary surveillance in the euro area91
3.6. Mechanism for preventing and correcting macroeconomic imbalances92
3.7. Enforcement of correction of excessive macroeconomic imbalances in the euro area95
4. Further attempts to strengthen fiscal supervision96
4.1. The Fiscal Compact96
4.2. ‘The two-pack’98
5. Assessment of the reform of the economic governance in the EU103
6. Conclusion115
Chapter 4. Austerity as a tool of fiscal consolidation – theoretical and empirical perspective116
1. Introduction118
2. Historical debate123
3. Neoliberalism and financialization129
4. Macroeconomic performance132
5. The justification for austerity137
6. Economic crisis and fiscal policy144
7. The ideological foundations of supply side economics154
8. Brexit and its implications for the UK162
9. Conclusion165
Chapter 5. Efforts of fiscal consolidation in the United Kingdom168
1. Introduction – background of the study170
1.1. The sovereign debt crisis and financial stability172
1.2. The United Kingdom’s Fiscal Stability Code172
1.3. The Maastricht Treaty and fiscal rules173
2. The pre-crisis overview176
2.1. Macroeconomic imbalances in the UK176
2.2. State of public finances before the crisis179
2.3. Budgetary forecast before the crisis180
3. Analysis of the financial crisis period181
3.1. Public sector net debt183
3.2. Relative projections and economic performances184
3.3. Output gap and real GDP186
3.4. The structural deficit187
4. Efforts of fiscal consolidation189
4.1. Policy implementation under Labour government189
4.2. Policy changes under coalition government190
4.3. Policy effects on the UK economy193
4.4. The UK’s public finances and Brexit195
4.4.1. The mechanical effect195
4.4.2. The national income effect196
5. The policy decision and summary197
Chapter 6. Fiscal consolidation in the Federal Republic of Germany200
1. Characteristics of fiscal policy in the Federal Republic of Germany 1999–2007202
2. Reforms in the public expenditure system218
3. Changes in the public revenue system in the years 1999–2007221
4. Characteristics of fiscal policy in the Federal Republic of Germany 2008–2015225
4.1. State interventionism in response to the crisis: 2008–2010225
4.2. Savings policy implemented by the Federal Republic of Germany in 2011–2015232
5. German fiscal policy and the business cycle236
6. The problem of common monetary policy243
7. Socio-economic effects of the fiscal policy of the Federal Republic of Germany248
8. Summary253
Chapter 7. Fiscal consolidation strategies in Hungary256
1. Introduction258
2. Excessive deficit in Hungary and scenarios for its correction259
3. Medium-term budgetary objective265
4. Public debt in Hungary267
5. Instruments for disciplining public finances on the expenditure side270
6. Scenarios of expenditure adjustments and their implementation273
7. Instruments for disciplining public finances on the revenue side277
8. Scenarios of revenue adjustments and their implementation282
9. Institutional changes favouring fiscal consolidation289
10. Evaluation of fiscal consolidation290
11. Economic effects of fiscal consolidation293
12. Macroeconomic imbalances in Hungary in the period of fiscal consolidation attempts300
12.1. Internal imbalances300
12.2. External imbalances303
13. Conclusions304
Chapter 8. Strategies of fiscal consolidation in Poland306
1. Introduction308
2. Fiscal consolidation in Poland in 2003–2008309
2.1. Adaptation measures to the nominal fiscal convergence criterion309
2.2. Changes on the revenue side of government institutions sector and local government321
2.3. Actions to reduce public spending324
3. Impact of 1999 pension reform on the condition of public finances in the period 2004–2015330
4. Fiscal policy in Poland in response to the global financial and economic crisis339
4.1. New solutions adopted in the Public Finance Act of 2009339
4.2. Disciplining public finances in Poland after launching the excessive deficit procedure in 2009345
5. Summary359
Chapter 9. Testing the dynamic relationships between the public financial sector deficit and the macroeconomic variables in selected EU countries362
1. Description of the testing procedure364
2. Dynamic modelling results in selected EU economies367
2.1. Poland370
2.2. The United Kingdom372
2.3. Hungary372
2.4. Germany374
2.5. France375
2.6. Sweden376
3. Analysis of the impulse response function378
4. The results of Granger causality test384
5. Summary387
Annex388
Chapter 10. The impact of the financial crisis on the distribution of total power across the member states of the European Union396
1. Introduction398
2. The measurement of power and its distribution in the European Union400
2.1. The applicability of the power model and its core components400
2.2. The distribution of power in the European Union407
2.3. Total power and stability at the onset of the recession in the EU411
3. Shifts in the stability of total power414
3.1. The position during the recession414
3.2. The position after the recession419
3.3. Economic potential and public spending in the Baltic states422
4. The impact of the crisis on the Baltic states and their fiscal responses423
4.1. Changes in GDP output from 2006 to 2014423
4.2. Changes in the structure of total power and its causes – Poland and the Baltic states425
4.3. Drivers of growth and debt compared428
5. Conclusion430
Chapter 11. Process of economic convergence of European countries434
1. Initial remarks436
2. Models for cross-section and time-series variables configuration437
3. Methods for stratified analysis442
4. Initial analysis of GDP per capita ratios variation in European countries in 1950–2015445
5. Analysis of moveable dynamics indexes for GDP per capita ratios in European countries450
6. Analysis of the ranking of European countries by GDP per capita ratios in selected years453
7. Summary458
Chapter 12. Options for disciplining public finances – synthesis460
1. Condition of public finances as a result of various factors462
2. Assessment of the impact of fiscal stimulus on public finances in the European Union countries463
3. Convergence or divergence – research results468
4. Case study on the assessment of disciplining public finances in the surveyed countries469
5. Evaluation of fiscal consolidations487
6. Evaluation of the role of new public governance in disciplining public finances494
7. Variants for achieving public finance discipline – conclusions for Poland499
Annex504
Bibliography510

CHAPTER2.CONCEPTSOFFISCALCONSOLIDATION

adifferentstrength0Itwillbedeterminedbytheconditionofpublicfinanceandthe

economyatthebeginningofconsolidationandtheeconomicprosperityatthetime

ofchange0Predictingtheeffectivenessofconsolidationeffortswouldrequirerecog-

nizingthepowerofmultipliereffectsinthevariousphasesofthecycle0

2.2.Choiceofconsolidationstrategyandmacroeconomiceffects

Mostcontroversies,bothintheoryandpraxis,refertothechoiceofconsolidation

strategy0Discipliningthepublicfinancescanbebasedonastrategyfocusedeither

ontheincomesideorontheexpenditureside0Thereisalsoapossiblestrategyin

whichdiscretionaryactionsarecarriedoutbothontheincomeandtheexpenditure

sides0Consolidationinstrumentsaffecttheeconomythroughdifferentchannels0The

increaseinpublicexpenditureoninvestmentandconsumptionshouldtriggeranin-

creaseinaggregatedemand0Inturn,asaresultofincreasedpublictransfersandtax

reductions,aggregatedemandcanbeexpectedtoundergochangescausedbythe

changingamountofdisposableincome0

Whilepreparingtheconsolidationstrategy,theimpactoftheproposedactionson

therealsectorintheshortandlongtermshouldbetakenintoaccount0Intheshort

term,theimpactwillplaythecrucialroleonthedemand,inthelongterm,onthepo-

tentialGDP

0Empiricalstudiesshowthattheeffectsoffiscalstrategiesusingdifferent

toolsaregoingtovaryovertime0Almeidaetal0showthatconsolidationrelyingon

cuttingexpenditures(loweringpublicconsumption)willhavethegreatestnegative

impactonproductioninthefirstyearofconsolidation013Itissodifferentinthecase

ofconsolidationbasedontaxincreases,aswiththismethod,thesecondyearafter

theincreasewillresultinhigherGDPlossesthantheconsolidationstrategybased

onthereductionofpublicexpenditure0Onthisbasis,theyrecommendthatfiscal

consolidationinthefirststageshouldbetargetedatexpenditurecutsratherthantax

increases0SimilarconclusionsaredrawnbyCoenenetal0,onthebasisofcompara-

tiveanalysisoffiscalstimuluseffectsintheshortruncausedby:publicconsumption

growth,increaseingovernmentinvestmentexpenditure,increaseingeneraltransfers,

reductionofpersonalincometaxrates,reductionofcorporateincometax,reduction

ofconsumptiontaxation,increaseintransferstargetedtowardslow-incomehouse-

holds014TheyusedsevenstructuralmodelsdevelopedbyeconomistsfromtheFede-

ralReserveSystem,theEuropeanCentralBank,theInternationalMonetaryFund,

theEuropeanCommission,theOECDandtheBankofCanada0Theresultsindicate

astrongermultipliereffectofexpenditure(withasmallinvestmentadvantageover

13Almeidaetal.,GFiscalConsolidation”,p.22.

14G.Coenen,GEffectsofFiscalStimulusinStructuralModels”,AmericanEconomicJournal:Macro-

economics,vol04,no01,2012,pp022–680

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