Government Fiscal and Real Economy Responses to the Crises: Automatic Stabilisers Versus Automatic Stabilisation

20 Pages Posted: 13 Jan 2012

See all articles by Jonas Fischer

Jonas Fischer

European Union - Directorate General for Economic and Financial Affairs (DG ECFIN)

Isabelle Justo

European Union - Directorate General for Economic and Financial Affairs (DG ECFIN)

Date Written: March 25, 2010

Abstract

This paper looks at the discretionary fiscal and real economy support measures introduced by EMU Member States in response to the crises. The analyses build on a data base assembled by the Commission on individual crises response measures with a view to survey the implementation of the European Economic Recovery Programme (EERP). The paper first provides a broad overview of the types of crises-related measures taken, including broad estimates of their budgetary dimension. On this basis it appears that on an aggregate level, the discretionary support has been in line with agreed principles of being timely, temporary and targeted. Member States with restricted fiscal space has overall taken a more restrictive stance than those with more room of manoeuvre. The paper then looks at how these discretionary measures complement the "automatic" budget stabilisation. It appears that, in budgetary terms, about half of the discretionary measures add to the areas already covered by automatic stabilisers while the other half address other areas such as investments, industrial sectors and vulnerable groups particularly hit by the crises. The overall experience may suggest that it has been helpful with agreed ex-ante principles for how discretionary stimuli should be provided and that the provision of discretionary stimulus under such conditionality can work to strengthen the budgetary stabilisation capacity in a flexible way.

Suggested Citation

Fischer, Jonas and Justo, Isabelle, Government Fiscal and Real Economy Responses to the Crises: Automatic Stabilisers Versus Automatic Stabilisation (March 25, 2010). Available at SSRN: https://ssrn.com/abstract=1984670 or http://dx.doi.org/10.2139/ssrn.1984670

Jonas Fischer (Contact Author)

European Union - Directorate General for Economic and Financial Affairs (DG ECFIN) ( email )

BU-1 05/190
Brussels, Bruxelles B-1049
Belgium

Isabelle Justo

European Union - Directorate General for Economic and Financial Affairs (DG ECFIN) ( email )

BU-1 05/190
Brussels, Bruxelles B-1049
Belgium

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