Fiscal Policy in the Southern European Union Countries : The Aftermath of COVID-19

This book examines public debt hoarding within the Euro Area, which is one of the most complicated challenges regarding modern fiscal policy-making. The author offers an up-to-date analysis of the fiscal situations of Italy, Spain, Portugal, and Greece. The book describes key mechanisms of debt transmission, discusses the potential establishment of fiscal and debt union in the EU, identifies numerous implications, and connects the fiscal positions of the examined countries with the structural flaws of the Euro Area and the monetary policy of the European Central Bank. Moreover, the work presents an estimation of structural budget balances, including a comparison with the estimates of major international institutions such as the IMF, OECD, and European Commission. A separate chapter is devoted to analysing the fiscal policy determinants, using time series since the late 19th century, and the issue of fiscal policy efficiency. Finally, the work provides an overview of debt resolution options. Overall, this book offers eight core chapters intended for the public, professional economists, and policymakers. Review Summaries Acknowledgements About This Book Contents About the Author Abbreviations List of Figures List of Tables Chapter 1: Introduction Chapter 2: Fiscal Policy and Government Debt in the Twenty-First Century 2.1 Basic Principles of Fiscal Policy 2.2 Government Debt and Related Definitions 2.3 Adverse Effects of Excessive Debt Accumulation 2.3.1 Sovereign Debt and Economic Growth 2.4 Sovereign Debt Sustainability Assessments References Chapter 3: European Debt Crisis and Flaws of the Euro Area 3.1 Causes and Implications of the European Debt Crisis 3.1.1 Implicit Bail-Out Mechanism 3.2 Optimum Currency Area Theory 3.3 Systemic Flaws of the Euro Area 3.3.1 Overly Ambitious Integration Ideology 3.3.2 Country Composition of the Euro Area 3.3.3 The Common Monetary Policy Under Fiscal Dominance 3.3.4 Socialisation of Risks and Moral Hazard 3.3.5 Snowball Effects and Systemic Inertia References Chapter 4: Sovereign Debt Channels in the Euro Area 4.1 Debt-Related Institutional Characteristics of the Euro Area 4.2 Nature of Democracy and Political Cycles 4.3 Information Asymmetries 4.4 Keynesian Stabilisation Efforts 4.5 Reputation and Expectations 4.6 Strict Preferences 4.7 Current Macroeconomic Conditions and COVID-19 Pandemic 4.8 Future Prospects and Other Factors References Chapter 5: European Fiscal and Debt Union 5.1 Definition of a Fiscal Union 5.2 Potential Benefits and Costs 5.3 Implicit Assumptions of a Viable Fiscal Centralisation 5.4 Economic Shocks and Centralised Fiscal Policy 5.5 COVID-19 Pandemic and European Debt Union References Chapter 6: Specific Characteristics of EU4 Economies 6.1 Main Country Characteristics 6.2 Positions of the Countries in the EU 6.3 Country Positions in the European Union 6.4 Country Positions in the Euro Area 6.5 EU4 Positions in Relation to Each Other References Chapter 7: Fiscal Situation in the COVID-19 Aftermath 7.1 Main Fiscal Indicators 7.1.1 Headline Indicators 7.1.2 Debt Structure and Related Indicators 7.1.3 Selected Benchmarks 7.2 Fiscal Stances, Fiscal Efforts, and Related Indicators 7.2.1 Estimation of Structural Budget Balances 7.2.1.1 The Nature of One-Off and Other Temporary Measures 7.2.1.2 Estimation of Output Gaps and Their Pitfalls 7.2.2 Development of Estimated Indicators 7.3 Debt Dynamics and Sustainability 7.3.1 Historical Debt Dynamics of the EU4 Countries 7.3.2 Long-Term Debt Projections and Sensitivity Analysis References Chapter 8: Long-Term Determinants and Efficiency of Fiscal Policies 8.1 Fiscal Reaction Functions 8.2 Fiscal Multipliers References Chapter 9: Sovereign Debt Resolution Prospects 9.1 Debt Monetisation in the Euro Area 9.2 Fiscal Consolidation 9.2.1 Temporary Measures: Sales of Assets 9.2.2 Long-Term Measures: Revenues and Expenditures 9.2.3 Long-Term Measures: Administrative Tools 9.3 Structural Reforms Promoting Economic Growth 9.4 Government Default 9.5 Appropriate Solutions References Chapter 10: Conclusions Untitled