Fiscal Adjustment between 1991 and 2002: Stylised Facts and Policy Implications
ECB Occasional Paper No. 9
40 Pages Posted: 2 Aug 2005
Date Written: February 2004
This paper aims to assess whether the implementation of the European Union (EU) framework of fiscal rules has been successful in promoting budgetary consolidation in EU Member States. The paper focuses on the period 1991-2002. Stylised facts show that Member States implemented major budgetary adjustments in the 1990s marking clear structural breaks in the policy regimes compared with the previous decade. However, most progress was made via revenue-based adjustment, including temporary measures, with insufficient emphasis put on primary expenditure restraint. In recent years, "consolidation fatigue" has been evident in many Member States. Although an unfavourable economic environment has adversely affected nominal budget balances in recent years, budget indicators suggest that the process of budgetary adjustment, which started in the 1990s, is far from complete in many countries.
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