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Temporary measures in Italy: buying or losing time?

Author

Listed:
  • Sandro Momigliano

    (Bank of Italy, Structural Economic Analysis Department, Public Finance Division.)

  • Pietro Rizza

    (Bank of Italy, Structural Economic Analysis Department, Public Finance Division.)

Abstract

In this paper we examine the effects of temporary measures on the Italian budget in the period 1997-2006 and assess their appropriateness. We also analyse the role of extraordinary operations which reduced the level of public debt in the same time frame while leaving the net worth of the public sector broadly unchanged. Our analysis suggests that temporary measures and extraordinary operations were used mainly to comply formally with EU fiscal rules without incurring the economic and political costs of more structural adjustment. Policy-makers bought time in a worsening cyclical context, expecting the recovery to be imminent. Ex post information reveals that the timing of this strategy was wrong. In a broader temporal perspective, the use of extraordinary operations has made it possible to postpone more permanent actions which would have improved the sustainability of Italian public finances. It is difficult not to conclude that precious time has been lost designing an equitable distribution across generations of the expected costs of the upcoming demographic transition.

Suggested Citation

  • Sandro Momigliano & Pietro Rizza, 2007. "Temporary measures in Italy: buying or losing time?," MNB Conference Volume, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 1(1), pages 61-71, December.
    • Handle: RePEc:mnb:confer:v:1:y:2007:i:1:p:61-71
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    References listed on IDEAS

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    Cited by:

    1. Antonio Bassanetti & Matteo Bugamelli & Sandro Momigliano & Roberto Sabbatini & Francesco Zollino, 2014. "The policy response to macroeconomic and fiscal imbalances in Italy in the last fifteen years," PSL Quarterly Review, Economia civile, vol. 67(268), pages 55-103.
    2. Maria Manuel Campos & Cristina Checherita-Westphal, 2019. "Economic consequences of high public debt and challenges ahead for the euro area," Working Papers o201904, Banco de Portugal, Economics and Research Department.
    3. Gábor P. Kiss, 2007. "One-off and off-budget items: An alternative approach," MNB Conference Volume, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 1(1), pages 18-27, December.

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    More about this item

    Keywords

    temporary measures; economic cycle; budgetary policies.;
    All these keywords.

    JEL classification:

    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • E69 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Other

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