Possibilities for Optimal Fiscal Policy-Making in the European Union

Abstract

Starting from 2008 worsening crisis events had grave repercussions for the state of public finances in the Euro-zone and the EU. Within a short time, debt to GDP ratios for the sector of government and local institutions rapidly soared across almost all EU member states, therefore shattering modest progress in consolidating public finances achieved in the pre-crisis period. The optimal fiscal policy is expected to stimulate stable and sustainable economic growth in the medium and long term. However, against a backdrop of worsening economic crises in numerous EU member states, it is difficult to talk about maximization of economic effectiveness. In 2011 and 2012 the key issues deal with progress in consolidating public finances through measures on a national level, as well as through early concentration of resources facilitating the growth under flagship initiatives, and through slowing the pace of public debt increase. Restoring budget discipline and macroeconomic sustainability, along with putting in place structural reforms, appears to be a principal issue to “European assessment period” also called “European Semester”.