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Fiscal consolidation and public debt in the European Union: Reevaluating the relationship

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  • Lara Greta MERLING

    (Bucharest University of Economic Studies, Romania)

  • Alexandru VLADOI

    (Bucharest University of Economic Studies, Romania)

Abstract

The initial shock from and response to the Global Financial Crisis (GFC) in 2008 had a profound impact on the fiscal balances and subsequently the government debt ratios of countries in the European Union (EU). This paper examines the relationship fiscal consolidation measures and the changes in debt ratios that followed. The findings highlight that the negative feedback of fiscal consolidation on economic growth in this context can translate into increases, rather than decreases in government debt ratios. As debt levels in most European Union countries are reaching record levels in the aftermath of Covid-19, these results warn of the risks of a stunted recovery if a similar approach as in the aftermath of the GFC is pursued.

Suggested Citation

  • Lara Greta MERLING & Alexandru VLADOI, 2022. "Fiscal consolidation and public debt in the European Union: Reevaluating the relationship," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(2(631), S), pages 39-48, Summer.
    • Handle: RePEc:agr:journl:v:2(631):y:2022:i:2(631):p:39-48
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    References listed on IDEAS

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