A fiscally virtuous government?

A third success story of Germany has been the impressive fiscal consolidation. This is no small achievement: the global financial crisis and the subsequent European crisis put many European governments under massive pressure to support their economies in order to avoid an even deeper crisis. The chapter shows that fiscal consolidation and public debt reduction are not always virtues. Cutting spending and raising taxes can, in fact, be disastrous during periods of crisis or recession. Fiscal austerity can be destabilizing and trigger a vicious cycle of low supply and low demand, thereby turning out to be counterproductive by weakening potential growth and long-term investment. Fiscal consolidation may be harmful to the long-term potential of an economy and to welfare if it cuts the most productive public spending on education or infrastructure, for example. Assessing German fiscal policy over the past decade reveals that all these elements apply to Germany.

La valutazione delle performance nella pubblica amministrazione italiana: dalla stagione dei controlli alla spending review

The paper discusses the evolution of public performance evaluation from the early nineties to the present, age of the so-called spending review. It is a re-reading of facts with an operational dimension, also to orient future choices and the growth of the country, promoting policies for the development of productive public spending and acknowledging merit.

PERSISTENT DEFICIT, GROWTH, AND INDETERMINACY

In this paper, we look for long-run and short-run effects of fiscal deficits on economic growth in an endogenous growth model with productive public spending that may be financed by public deficit and debt. The model shows a multiplicity of long-run balanced growth paths (a high-growth and a low-growth steady state) and a possible indeterminacy of the transition path, which may be consistent with the empirical literature, which exhibits strong nonlinear responses of economic growth to fiscal deficits. Starting from the high-growth steady state, a positive impulse in the deficit ratio exerts an adverse effect on economic growth in the long run, after an initial rise. Starting from the low-growth steady state, the situation may be radically undetermined, and the effect of fiscal deficit impulses is subjected to “optimistic” or “pessimistic” views on public-debt sustainability.