Suchergebnisse

In Lisbon the European Council proclaimed a European growth strategy. It considers an average economic growth rate of around 3 percent as a realistic prospect for the coming years and assigns public finances an important role in the process of achieving this goal. This paper addresses the question whether we can find empirical evidence for European countries that public finance reform affects trend growth. Focusing on time series patterns, we investigate whether there have been persistent shifts or trends in economic growth and fiscal variables over the last 40 years. In addition, we estimate a distributed lag model, which 1) indicates that government consumption and transfers negatively affect growth rates of GDP per capita over the business cycle, while public investment has a positive impact, and 2) provides robust evidence that distortionary taxation affects growth in the medium-term through its impact on the accumulation of private physical capital.

German public finances are currently subject to considerable changes in the macro-economic environment and this is probably only the beginning of more far-reaching developments in the future. Like many other European countries, Germany, on the one hand, faces the fiscal problems emerging from an ageing population, which will put upward pressure on social security expenditures. On the other hand, the public will reject an increase of the already high tax burden and an increasingly globalized economy and further European integration may put an additional limit on the government's capability to raise additional revenues. Finally, German governments will have to show whether they are able to meet these conflicting challenges in the future within the fiscal framework set by the Maastricht Treaty and the Stability and Growth Pact. Therefore, continued debt accumulation does not seem to be a viable option to circumvent the ageing problem and the limit on taxation. Thus we see three challenges for German public finances in the future. In this paper, we develop the recent history of German fiscal policy as a background to judging how fit Germany is to meet these challenges. Our main focus is on the government's fiscal strategies and the gradual erosion of the institutions that secured Germany's fiscal stability in the past.

Recent research has demonstrated the importance of good quality of fiscal adjustments for the success of government budget consolidations. We extend this approach to analyze the importance of the economic conditions in which fiscal consolidations are started for their success. The cyclical positions of the domestic & international economy, the initial debt level, & the stance of fiscal policy in the OECD are all important determinants of the likelihood of fiscal consolidations. They also affect the government's choice of consolidation strategy, making them important determinants of the success of fiscal consolidations. In contrast, the monetary policy stance plays only a negligible role for fiscal consolidations. The authors use the analysis to test for any Maastricht effects on the performance of European governments during the 1990s. Such effects are weak at best & occurred only during the first half of the decade. 9 Tables, 13 References. Adapted from the source document.