Symposium on the public finance after the crisis: Europe.

Author:Claeys, Peter


During the financial crisis--initiated by the so-called US sub-prime crisis in 2008--European countries have encountered a significant drop in economic growth, since many of them have been strongly integrated with the world economy and, due in part to this reason, extremely susceptible to financial boom-bust cycles. Some Eurozone member states like Germany have been quite successful to exit from this crisis within a couple of years, while others like Greece and Spain have been suffering from sluggish growth, a drought in credit, and a dramatic fall in all economic indicators, as summarized in the high unemployment levels since 2009. The miserable current economic situation in these countries raises serious doubts about their rapid recovery in the future.

The crisis in Europe has been unusual as private debt problems, mainly due to a collapse in the banking sector, were passed to sovereign debt. The fiscal crisis that followed in most EU countries has revealed particular governance problems in the Eurozone. National and subnational governments in the Eurozone countries have implemented various fiscal policy measures aimed at raising revenues and, at the same time, attempted to stimulate economic growth and to safeguard public service provision in response to the crisis. Yet the economic policy adjustment and coordination appears to have been more challenging in the individual Eurozone countries as well as on the European level than in other industrialized countries, as a country-specific monetary policy has become no longer feasible in the EMU since the introduction of euro. The political response has been hesitant, and is threatening even the very existence of the Eurozone.

National fiscal policies are now controlled under the rules of the Fiscal Compact, but enhanced coordination of tax and fiscal policies might be necessary to support further integration. In this context there have also been vivid (and also controversial) political and academic discussions extended to the necessity of the Fiscal Union and a Transfer Union in the Eurozone.

Within this general context, this symposium is designed to cover a variety of crucial issues which include: (1) fiscal policies to improve economic stability and fiscal sustainability; (2) the performance of the tax system and changes in tax policy; (3) the political economy, or the interplay between political factors and public finance challenges; and (4) public finance of...

To continue reading