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Fiscal Policy in New EU Member States: Go East, Prudent Man!

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Author Info
Ondřej Schneider () (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
Jan Zápal () (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)

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Abstract

The European Union (EU) accepted ten new member states (NMS) in 2004. These countries, mostly former socialist countries, have had to adjust their economic policies to the EU’s standards. Perhaps most difficult has proven to be fiscal policy whereby NMS must comply with the Stability and Growth Pact (SGP) rules. Indeed, six out of the ten NMS have breached the SGP limits and were put in Excessive Deficit Procedure (EDP). While the SGP is being modified, fiscal policy is set to remain on the agenda for all NMS in years to come. In this paper, we analyse fiscal policy in the NMS, focusing primarily on time period that immediately preceded their EU accession. We analyse the structure and scale of these countries’ fiscal policy and identify main trends in revenues and expenditures of their public budgets. We then explore dynamics of fiscal policy in the new member states and isolate main factors of the dynamics. Namely, we show how much of the consolidations was due to the fiscal authorities’ effort and how much was caused by external factors. We also show that most NMS’ governments have run rather inconsistent fiscal policy and have not consolidated their budgets appropriately by postponing politically difficult consolidation measures. However, we also identify a group of countries characterised by strong reform efforts and responsible fiscal policy making, supported usually by strong economic growth. In this context, room is given to economic, as well as political economy factors.

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Publisher Info
Paper provided by Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies in its series Working Papers IES with number 76.

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Length: 29 pages
Date of creation: 2005
Date of revision: 2005
Handle: RePEc:fau:wpaper:wp076

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Related research
Keywords: Fiscal Policy; New Member States; Consolidations; Stability and Growth Pact; Excessive Deficit Procedure; Growth Accounting; Probit Analysis.;

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Find related papers by JEL classification:
E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
H6 - Public Economics - - National Budget, Deficit, and Debt
H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods

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References listed on IDEAS
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Ondrej Schneider, 2007. "The EU Budget Dispute – A Blessing in Disguise?," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  2. Philipp Paulus, 2006. "The final blow to the Stability Pact? EMU enlargement and government debt," Otto-Wolff-Institut Discussion Paper Series 03/2006, Otto-Wolff-Institut für Wirtschaftsordnung, Köln, Deutschland. [Downloadable!]
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