The Effects of Crises and European Fiscal Governance Reforms on the Budgetary Processes of Member States

Abstract

The goal of this article was to explore how the experience of the crisis and the fiscal governance reforms at the European level have influenced budget processes in member states. Drawing on the Europeanization, fiscal governance and pubic crisis management literature, the article first outlines a series of propositions about the kinds of shifts in the budget process that we would expect to ensue from the crisis experience and European reforms. The empirical part of our article explores the validity of those theoretical conjectures in three different member states: Portugal, Austria and Finland. We found that the crisis experience and European reforms have led to increased centralization of the budgetary process in all three countries. Although we would have expected Austria and Portugal to move closer towards the contracts approach of fiscal governance, this has not happened as the medium-term expenditure frameworks are not viewed as binding.

Structural Budget Balance as a Fiscal Rule in the European Union—Good, Bad, or Ugly?

“…By specifying an aggregate resource constraint, the SBR can, in principle, offer a focal point for coordinating spending requests and, through that, counteract the bottom‐up pressures on the budget that are driven by common‐pool dynamics (Hallerberg et al 2009; Schick 2003). However, due to the methodological complexity of the rule, the exact value of the structural balance may be viewed as negotiable, which could undermine the strength of the finance ministry as a coordinator of fiscal policy (Raudla, Bur, and Keel 2020). The line ministries can contest the value of the structural balance and argue that, in fact, there is more fiscal space than claimed by the finance ministry.…”

“…In light of the sovereign debt crises, there is increasing debate among scholars and practitioners about which fiscal institutions could facilitate fiscal discipline while avoiding procyclical bias in fiscal policies (see, e.g., Bergman and Hutchison 2015; Combes, Minea, and Sow 2017; Jalles 2018). This debate is particularly pertinent to the European Union (EU) because, since the 2008–2010 crisis, it has passed a series of reforms in its fiscal governance framework designed to help improve fiscal policymaking on the part of member states (see, e.g., Barnes et al 2016; Eyraud and Wu 2015; Raudla, Bur, and Keel 2020). One of the significant reforms—adopted with the Fiscal Compact, which was part of the intergovernmental Treaty on Stability, Coordination, and Governance (TSCG) enacted in 2013—was the requirement for member states to introduce structural budget balance rule(s) (SBR) in their domestic legislation.…”

“…This requirement served the goal of increasing the domestic ownership of fiscal rules underpinning the monetary union (Eyraud, Gaspar, and Poghosyan 2017; Kukk and Staehr 2015). Given that the introduction of the SBR in the EU fiscal governance framework is considered a key change designed to help guide member states’ fiscal policies in the postcrisis period (Raudla, Bur, and Keel 2020), it is important to understand how this reform has influenced the budget processes in the member states. The incorporation of the SBR in national legislation was supposed to bring the structural balance requirement “closer to home” for the member states (i.e., create a sense of domestic ownership of the targets) (Eyraud, Gaspar, and Poghosyan 2017).…”

Deficit Financing Asymmetry and Nigerias Economic Growth: A Nonlinear Autoregressive Distributed Lag Approach

“…Quality institution proxied by contract intensive money exerts negative effect and insignificant on Nigerian economy and confirm the existence of inefficient institutions in African countries (Birdsall, 2007;Luiz, 2009;Sule, 2020). This could be reasons for continuous advocacy by European Commission (International Monetary Fund, 2009;Kukk & Staehr, 2015;Raudla & Keel, 2018) for fiscal governance through quality institutions that can drive full implementation of resources.…”

The European Fiscal Board: supranationalde novobody or orchestrator?

“…The episode shows how the Commission can coopt the EFB for its own agenda-setting by requesting ad-hoc advice on particularly salient topics. This is in line with the experience of national fiscal councils, which often bolster the negotiation position of their ministry of finance (von Hagen, 2018; Raudla et al ., 2020; Raudla and Douglas, 2021). Given the limited resources of the EFB any ad-hoc request by the Commission President will inevitably drain resources from its other main tasks to assess the euro area fiscal stance and the annual ex post review of the overall functioning of the fiscal framework.…”