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Introduction

In: Fiscal Policy in the European Union

Author

Listed:
  • Jesús Ferreiro
  • Giuseppe Fontana
  • Felipe Serrano

Abstract

In contrast to what happened during the golden age of Keynesian policies in the 1950s and 1960s, today fiscal policy has lost relevance, both in the short term as an instrument to stabilize the business cycle, with monetary policy gaining relevance, and in the long term with supply-side policies playing a predominant role. Two reasons explain the downgrading of fiscal policy. The first reason is a practical one, namely, the need to reduce the high levels of public deficit and debt, fiscal imbalances generated by the mix of increases in public spending and cuts in taxation and a tight monetary policy leading to high real interest rates. The second reason is related to the dominance of neoclassical theories, which maintain that both fiscal imbalances and the large size of public revenues and expenditures have a negative impact on economic activity and growth in the short and long term.

Suggested Citation

  • Jesús Ferreiro & Giuseppe Fontana & Felipe Serrano, 2008. "Introduction," Palgrave Macmillan Books, in: Jesús Ferreiro & Giuseppe Fontana & Felipe Serrano (ed.), Fiscal Policy in the European Union, pages 1-5, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-22826-9_1
    DOI: 10.1057/9780230228269_1
    as

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