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This paper compares the cyclical properties of fiscal policies across the 12 original eurozone countries and the future members from Central and Eastern Europe. For the sample period 1995-2005, the fiscal balance exhibits less inertia and is more counter-cyclical in Central and Eastern European countries than in members of the eurozone. The main differences arise from the revenue side. Differences in the formation of fiscal policy between current and future eurozone countries decrease over time. Autonomous fiscal policy has little or no effect on cyclical variability in either of the two groups of countries. Counter-cyclical fiscal policy appears to be effective in Central and Eastern European countries, but largely ineffective in eurozone countries.

Poland, the Czech Republic, Slovakia, & Hungary have in little more than ten years established market-based economies. The countries chose, in spite of geographical proximity & historical links, different reform strategies, especially with respect to inflation stabilization & privatization. The different strategies can to a large extent be explained by different starting points. In preparation for EU membership, the economic policies in the four countries have gradually converged. The economic results have been mixed. Many have gained from greater choice & higher living standards. Still, economic growth is only slightly above the performance of the EU countries, unemployment is high, & government budgets exhibit large deficits. Membership of the EU could bring about more trade & investment & help narrow the income gap towards Western Europe. Adapted from the source document.

PurposeLarge or increasing stocks of non-performing loans in the banking sector constitute threats to financial stability. This paper considers to which extent various macroeconomic and macro-financial factors may serve as leading indicators for the dynamics of the ratio of non-performing loans to total loans.Design/methodology/approachThe paper estimates panel data models for all EU countries and two groups of EU countries using quarterly data over approximately 20 years.FindingsThe estimations show that many macroeconomic and macro-financial variables are leading indicators for non-performing loans in the EU countries, even years ahead. Higher GDP growth, lower inflation and lower debt are robust leading indicators of a lower ratio of non-performing loans in the future. The current account balance and real house prices are important indicators for the Western European group but not for the Central and Eastern European group.Research limitations/implicationsThe estimations are carried out for panels of EU countries and the effects may hence be seen as averages for the countries in the particular panel and may not apply for individual countries.Practical implicationsNational and international authorities have brought in systems to detect and address imbalances and emerging problems in the financial sectors. Many of the measures operate with long lags, and so it is important to assess whether various macroeconomic and macro-financial variables may serve as leading indicators for future developments of non-performing loans.Originality/valueThe main contribution of the paper is that it estimates models meant expressly for predicting non-performing loans several years ahead. The results are thus of practical use for national and international authorities which typically have access to measures that operate with a long delay. The analysis also includes more macroeconomic and macro-financial variables as leading indicators than have typically been used in earlier studies.

After the outbreak of the global financial crisis, some governments in the EU experienced serious fiscal problems, while others were less affected. This paper seeks to shed light on the divergent fiscal performance in the EU countries before and after the outbreak of the crisis. Fiscal reaction functions of the primary balance are estimated for different groups of EU countries using quarterly data for the pre-crisis period 2001-2008 and for the crisis period 2009-2014. The pre-crisis estimations reveal some differences in persistence and cyclical reaction between different groups of countries, but in most cases little feedback from the debt stock to the primary balance. The fiscal reaction functions of the countries that eventually developed fiscal problems do not stand out. The estimations on data from the crisis period show largely unchanged persistence and counter-cyclicality but much more feedback from the debt stock, and this applies both to the crisis countries and those less affected. In spite of large deficits and accumulation of debt, the underlying fiscal reaction has become more prudent after the outbreak of the European debt crisis. ; The final publication is available at Springer via http://dx.doi.org/10.1007/s10368-014-0309-4