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Making public finances more growth and equity-friendly in the euro area

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  • Álvaro Pina

    (OECD)

Abstract

Across the euro area, the ability of public finances to support equitable growth has tended to deteriorate. Concerns about high and rising public debt, together with market pressure in some cases, led to sharp fiscal consolidation in 2011-13, against the backdrop of a weak economic situation at the time, which is considered to have made the recession deeper and longer. Consolidation has slowed down afterwards, but countries with fiscal space have made limited use of the leeway allowed under EU fiscal rules to support euro area aggregate demand. The expenditure composition has generally become less growth-friendly, with large cuts in public investment. On the revenue side, already high taxes on labour have tended to increase further. Structural reforms with direct positive implications for the composition or efficiency of public finances have stalled. While most policy levers to improve public finances remain at the country level, European and national policies can be mutually reinforcing in fiscal governance and public investment. To achieve a euro area fiscal stance that fosters the recovery, countries with fiscal space under the Stability and Growth Pact rules should use budgetary support to raise growth, and existing incentives and flexibility should be taken advantage of to pursue reforms of tax and spending policies. At the national level, it is essential to further upgrade budgetary frameworks, including through the adoption of expenditure rules and regular performance of spending reviews. To promote capital formation and make it more effective, EU budget resources for investment should be deployed in a way to crowd in national public funds and private financing, and foster greater investment productivity. At the national level, better coordination of investment across levels of government and upgraded administrative capacity would increase investment efficiency. This Working Paper relates to the 2016 OECD Economic Survey of the euro area (www.oecd.org/eco/surveys/economic-survey-european-union-and-euro-area.htm) Rendre les finances publiques plus favorables à la croissance et à l'équité dans la zone euro Dans la zone euro, la capacité des finances publiques à soutenir la croissance équitable s’est globalement détériorée. Face aux inquiétudes suscitées par le niveau élevé et croissant de l’endettement public, et parfois sous la pression exercée par les marchés, les autorités des pays ont procédé à un effort d’assainissement budgétaire massif en 2011-13 dans un contexte de conjoncture économique défavorable, ce qui est généralement considéré comme ayant contribué à intensifier et à prolonger la récession. Le processus d’assainissement s’est ensuite ralenti, mais les pays disposant d’une marge de manoeuvre budgétaire ont peu utilisé la souplesse autorisée par les règles budgétaires de l’UE pour stimuler la demande globale dans la zone euro. De manière générale, la composition des dépenses est devenue moins favorable à la croissance du fait de coupes drastiques dans les investissements publics. Sur le plan des recettes, la fiscalité du travail, déjà élevée, s’est encore alourdie. Les réformes structurelles qui peuvent avoir des retombées positives directes sur la composition ou l’efficience des finances publiques ont marqué le pas. Si la plupart des leviers d’action permettant d’améliorer les finances publiques restent situés au niveau des pays, les politiques européennes et nationales peuvent se renforcer mutuellement dans les domaines de la gouvernance budgétaire et de l’investissement public. Pour faire en sorte que l’orientation budgétaire de l’ensemble de la zone euro contribue à alimenter la reprise, les pays qui disposent d’une marge de manoeuvre budgétaire au sens des règles du Pacte de stabilité et de croissance devraient recourir à l’appui budgétaire pour stimuler la croissance, et il faudra mettre à profit les dispositifs d’incitation existants et la souplesse prévue par les règles en vigueur pour poursuivre la réforme des politiques fiscales et de dépenses. Au niveau national, il est essentiel de poursuivre l’amélioration des cadres budgétaires, y compris en adoptant des règles de dépenses et en procédant à des examens réguliers des dépenses. Pour promouvoir la formation de capital et rendre celui-ci plus efficace, les ressources budgétaires de l’UE disponibles pour l’investissement devraient être déployées de façon à créer un effet d’attraction sur les fonds publics et les financements privés nationaux et à rendre l’investissement plus productif. À l’échelon national, des investissements mieux coordonnés entre les différents niveaux d’administration et des capacités administratives renforcées conféreraient aux investissements une efficience accrue. Ce Document de travail se rapporte à l’Étude économique de l’OCDE de la Zone euro 2016 (http://www.oecd.org/fr/economie/etude-economique-union-europeenne-et-zone-euro.htm)

Suggested Citation

  • Álvaro Pina, 2016. "Making public finances more growth and equity-friendly in the euro area," OECD Economics Department Working Papers 1316, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:1316-en
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    File URL: http://dx.doi.org/10.1787/5jlv2jgl4kbr-en
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    References listed on IDEAS

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    1. Andrés Rodríguez-Pose & Enrique Garcilazo, 2015. "Quality of Government and the Returns of Investment: Examining the Impact of Cohesion Expenditure in European Regions," Regional Studies, Taylor & Francis Journals, vol. 49(8), pages 1274-1290, August.
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    More about this item

    Keywords

    assainissement budgétaire; euro area; fiscal consolidation; fiscal councils; investissement public; organismes budgétaires indépendants; pacte de stabilité et de croissance; public investment; stability and growth pact; zone Euro;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems

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