H6 - National Budget, Deficit, and DebtReturn

The global financial crisis and the ensuing European debt crisis have exposed weaknesses in the structural fiscal stance of many European countries, where public debt has risen sharply over the past decade. At the same time, fiscal rules were reconsidered and adjusted, which did not consider the stabilizing function of fiscal policy important and allowed the governments of European countries to set pro-cyclical fiscal policies. Along with the implementation of new fiscal rules, politically independent national fiscal councils have also been established in the EU. An empirical analysis of compliance with fiscal rules in EU countries in 2002-2019 shows that only 55% of fiscal rules were complied with. At the same time, it seems that significant differences can be found between countries in terms of their tendency to comply with fiscal rules. The long-term negative consequences for fiscal policy were caused by the COVID-19 pandemic, which resulted in an average increase in debt relative to GDP of more than 10 percentage points.