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The Reaction of Fiscal Policy to the Crisis in Italy and Germany: Are they really polar Cases in the European Context?


  • Britta Hamburg

    () (Bundesbank)

  • Sandro Momigliano

    () (Banca d’Italia)

  • Bernhard Manzke

    () (Bundesbank)

  • Stefano Siviero

    () (Banca d’Italia)


The deep recession which hit the world economy towards the end of 2008 induced massive, internationally-coordinated policy responses, both monetary and fiscal. In this paper we examine public finance developments in Germany and Italy in 2009. We find that the larger stimulus measures adopted in Germany mostly compensated a more favorable underlying trend; overall, the cyclically-adjusted primary balances worsened by a similar extent in the two countries. We further estimate the automatic stabilisers to have had an impact on the deficit of similar magnitude in Germany and Italy. We then assess, on the basis of counterfactual simulations, to which extent discretionary measures and automatic stabilizers were able to mitigate the downturn in the two countries. Our results show that the public sector contrasted the fall in real GDP in 2009 by more than 2 percentage points in Germany and by 1 per cent in Italy. The difference in the stabilizing effect of the two public sectors reflects not only the different size of the stimulus measures, but also the higher fiscal multipliers associated with Germany.

Suggested Citation

  • Britta Hamburg & Sandro Momigliano & Bernhard Manzke & Stefano Siviero, 2010. "The Reaction of Fiscal Policy to the Crisis in Italy and Germany: Are they really polar Cases in the European Context?," Revista de Economía y Estadística, Universidad Nacional de Córdoba, Facultad de Ciencias Económicas, Instituto de Economía y Finanzas, vol. 0(2), pages 103-133, July.
  • Handle: RePEc:ief:reveye:v:48:y:2010:i:2:p:103-133

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    Cited by:

    1. Michele Caivano & Lisa Rodano & Stefano Siviero, 2010. "The transmission of the global financial crisis to the Italian economy. A counterfactual analysis, 2008-2010," Questioni di Economia e Finanza (Occasional Papers) 64, Bank of Italy, Economic Research and International Relations Area.
    2. Francesco Caprioli & Sandro Momigliano, 2011. "The effects of fiscal shocks with debt-stabilizing budgetary policies in Italy," Temi di discussione (Economic working papers) 839, Bank of Italy, Economic Research and International Relations Area.

    More about this item


    Discretionary Fiscal Policy; Automatic Stabilizers Germany; Italy.;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General


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