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Still focused on public deficits. Some remarks on the euro area stability programmes 2012-2015

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  • Gregor Semieniuk

Abstract

Using the financial balances accounting identity, we analyze whether there is evidence in recent national accounting data and the projections of the Stability Programmes (SP), that the focus on fiscal deficits to the exclusion of other economic variables risks further deterioration of the euro area economy’s growth rate. We find that, in the past given the focus on shrinking public deficits, growth forecasts have almost always deteriorated from one SP to the next, while the macroeconomic situation is not markedly different from the beginning of the euro area crisis, 2010. We conclude that continued fiscal austerity and disregard of current account imbalances is likely to lead to further deteriorating data that fail to live up to current growth forecasts. This will lead in turn to further growth forecast downward revision in the next SP batch. A simple simulation of a deterioration in the external economic environment indicates that a symmetric rebalancing of the current account imbalances might be more feasible than the current, asymmetric rebalancing.

Suggested Citation

  • Gregor Semieniuk, 2012. "Still focused on public deficits. Some remarks on the euro area stability programmes 2012-2015," IMK Working Paper 101-2012, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  • Handle: RePEc:imk:wpaper:101-2012
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    File URL: http://www.boeckler.de/pdf/p_imk_wp_101_2012.pdf
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    Cited by:

    1. Jörg Bibow, 2013. "Lost at Sea: The Euro Needs a Euro Treasury," IMK Studies 35-2013, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.

    More about this item

    Keywords

    Euro area crisis; fiscal deficit; financial balances accounting identities; macroeconomics imbalances; austerity; stability programmes;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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