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Fiscal Consolidation by Austerity and EU Surveillance Policies

Author

Listed:
  • Iancu, Aurel

    (National Institute of Economic Research, Romanian Academy)

  • Olteanu, Dan

    (National Institute of Economic Research, Romanian Academy)

Abstract

After a brief introduction dealing with critical opinions of some economists on the European austerity policy, the authors point out that austerity as a means of achieving fiscal consolidation and financial stability is applied when the fiscal domain is weak. After analyzing the effects of the 2009 crisis on some indicators and austerity measures taken by almost all EU countries, the study presents the content and the role of the EU fiscal compact and methodology used to support the fiscal consolidation measures. Most of the study consists in the analysis of the outcome of this methodology (through indicators, key-equations, graphs) revealing the relationships between indicators: effective GDP and potential GDP, production variation, effective, cyclical and structural deficits as well as the deficit in the balance of payments. The paper reveals some shortcomings of the new mechanism which affect the development of some major segments of the real economy, such as public investments, and further the economic potential growth on medium and long terms.

Suggested Citation

  • Iancu, Aurel & Olteanu, Dan, 2015. "Fiscal Consolidation by Austerity and EU Surveillance Policies," Working Papers of National Institute for Economic Research 151209, Institutul National de Cercetari Economice (INCE).
    • Handle: RePEc:ror:wpince:151209
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    References listed on IDEAS

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    More about this item

    Keywords

    fiscal policy; budget deficits; structural deficits; austerity; fiscal consolidation; the golden rule of public finance; economic growth;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • F02 - International Economics - - General - - - International Economic Order and Integration
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • H6 - Public Economics - - National Budget, Deficit, and Debt
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations

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