Public Finance and National Accounts in the European Context (Financial and Monetary Policy Studies Book 47)

This book offers an essential guide to Public Finance and National Accounts in the context of the European Union. Since the creation of the Eurozone, fiscal policy has been at the heart of economic (but also political/media) discussions in the EU. From the Stability and Growth Pact (1997) to the more recent Fiscal Treaty, EU and Eurozone, countries have been subject to various fiscal rules. The importance of these rules, and of the subsequent procedures that every Eurozone country has to adhere to, is unquestionable. The book provides the reader with an in-depth understanding of the complex EU rules concerning fiscal policy, breaking down the corresponding legal texts into simple and accessible language. It has a broad interdisciplinary appeal, and scholars and practitioners whose work involves these areas will find it of particular interest. Acknowledgements 7 Contents 8 List of Abbreviations 13 About the Author 15 Chapter 1: The Stability and Growth Pact and the New ``Flexibility ́ ́ Rules 16 1.1 Fiscal Policy 16 1.2 The Stability and Growth Pact 18 1.3 The New Flexibility Rules 43 1.3.1 Public Investment 44 1.3.2 Structural Reforms 45 1.3.3 Cyclical Conditions 45 Chapter 2: Reforming Europe and the Euro Zone 51 2.1 Integration of the Treaty on Stability, Coordination, and Governance into EU Law 51 2.2 New Budgetary Instruments for a Stable Euro Area Within the Union Framework 52 2.3 Completing the Financial Union 52 2.4 The European Monetary Fund 53 2.5 The European Minister of Economy and Finance 54 2.6 Banking Union Backstop 55 2.7 A Dedicated Convergence Facility for Member States in the Process of Joining the Euro 56 2.8 Structural Reform Support Service 57 2.9 A Stabilisation Function 58 Chapter 3: The Fiscal Compact, the European Semester, and the Two-Pack and Six-Pack 60 3.1 Background 61 3.2 The Fiscal Compact 62 3.3 The European Semester 67 3.4 Six-Pack and Two-Pack 71 Chapter 4: Macroeconomic Imbalance Procedure 81 4.1 Background 81 4.2 The Macroeconomic Imbalance Procedure in the Preventive Arm 82 4.3 The Macroeconomic Imbalances Procedure in the Corrective Arm 84 Chapter 5: The National Accounts 85 5.1 The Concept of the National Accounts 85 5.2 The National Accounts Features 87 5.3 The National Accounts and the Calculation of the Deficit and the Public Debt 93 Chapter 6: What Changes in the ESA 2010? 95 6.1 The Changes of the ESA 2010 95 6.2 Main Changes in the Deficit and in the Public Debt 97 6.2.1 Change to the Rule of Definition of the Consolidation Perimeter 97 6.2.2 What Does the Test of the Entity Being Market or Not Mean? 98 6.2.3 Other Changes 100 Chapter 7: Excessive Deficit Procedure 102 7.1 The Origins of the Excessive Deficit Procedure 102 7.2 Excessive Deficit Procedure Basis: The European System of Accounts 2010 104 7.3 The Opening of an Excessive Deficit Procedure 105 7.4 The Functioning of the Excessive Deficit Procedure 108 7.5 The Report of Information in the Excessive Deficit Procedure 111 7.6 The Information Available in the Excessive Deficit Procedure 112 Chapter 8: The General Government Sector in the National Accounts 114 8.1 The Sectors of the National Accounts 114 8.2 The Institutional Units 116 8.3 The General Government Sector 117 8.4 The General Government Sector and the Case of Non-Profit Institutions 119 8.5 The Criterion of Market and Non-market Revenue 120 8.5.1 The Decision of the Test of Market Revenue 122 8.5.2 Specific Cases 125 8.6 Additional Information 128 Chapter 9: The Different Fiscal Balances 130 9.1 Fiscal Balance 130 Chapter 10: The Time of Recording of Operations 134 10.1 Background 134 10.2 Time of Recording and Output Valuation 136 Chapter 11: Accounting for the Revenue in the National Accounts 142 11.1 Background 142 11.2 Definition in the ESA 2010 143 11.3 Taxes and Contributions 148 11.3.1 Main Rules 148 11.3.2 Tax Refunds 149 11.3.3 Tax Amnesty 149 11.3.4 Tax Credits 150 11.3.5 Deferred Tax Assets 151 11.3.6 Other Revenue 152 11.4 Sale of Financial and Nonfinancial Assets 152 11.5 Privatisations 154 11.6 Nationalisation 155 11.7 Leases, Licences, and Concessions 156 11.8 Sale and Leaseback 158 Chapter 12: Accounting of Expenditure in the National Accounts 160 12.1 Expenditure in the National Accounts 160 12.1.1 Concept 160 12.1.2 Expenditure Classification 161 12.1.3 Link with Government Final Consumption Expenditure (P.3) 162 12.1.4 General Government Expenditure by Function (COFOG) 163 12.1.5 Court Decisions with Retroactive Effects 164 12.2 Public Debt Interest 165 Chapter 13: Public Debt 167 13.1 The Concept of Public Debt in the National Accounts 167 13.2 The Public Debt in the Excessive Deficit Procedure 170 Chapter 14: Specific Cases 172 14.1 Public-Private Partnerships 172 14.1.1 Public-Private Partnerships in the National Accounts 172 14.1.2 The SCUT ́s Case (Eurostat Decision of 2011) 179 14.1.3 Additional Information on PPPs 180 14.2 The Acquisition of Military Equipment 184 14.2.1 Military Equipment in National Accounts 184 14.3 Guarantees 187 14.3.1 Guarantees Concept and Classification in National Accounts 187 14.4 Grants (Subsidies) from the European Union 188 14.4.1 Grants in National Accounts 188 14.4.2 Cases Where the Beneficiary Does Not Belong to the General Government 189 14.4.3 Cases Where the Final Beneficiary Belongs to the General Government 190 14.5 Support to the Financial Sector (Financial Defeasance) 191 14.5.1 Bank Capitalisation in National Accounts 191 14.5.2 The Case of ``Bad Banks ́ ́ 193 14.6 The Central Bank 194 14.6.1 The Central Bank Dividends in National Accounts 194 14.7 Swaps 195 14.7.1 Interest Rate Swap Operations 195 14.7.2 Foreign Currency Operations 196 14.7.3 The Cancellation of Swaps 198 14.8 Capital Injections in SOE (Public Corporations) 200 14.8.1 Capital Injections in SOE in National Accounts 200 14.8.2 Cases Where Private Shareholders Are Not Involved 202 14.8.3 Cases Involving Private Shareholders 203 14.8.4 The Creation of a New Company or a New Business/Activity Area 203 14.8.5 Proper Rate of Return 203 14.8.6 Capital Injection in Companies ``Public Quasi Corporations ́ ́ 204 14.8.7 Capital Injection in Kind 204 14.8.8 Rules That Are Applicable in Special Circumstances 205 14.9 Participation in the European Funding Instruments 205 14.9.1 Capital Injections in National Accounts 205 14.10 Securitisation Operations 206 14.10.1 Definition of Securitisation Operations 206 14.10.2 Securitisation Operations in the National Accounts 207 14.11 Dividends, ``Super-Dividends ́ ́, and ``Interim Dividends ́ ́ 209 14.11.1 Definitions 209 14.11.2 Dividends Classification in National Accounts 210 14.12 Participation in Multilateral Financial Institutions 212 14.12.1 Capital Participation in National Accounts 212 14.13 Emissions Trading Allowances 213 14.13.1 ETS Revenues Classification in National Accounts 213 14.14 Debt Assumption and Cancellation 214 14.14.1 Debt Assumption and Cancellation in National Accounts 214 14.14.2 The Specific Case of Debt ``Rescheduling ́ ́ 216 14.14.3 Debt Write-Offs or Write-Downs 216 14.14.4 Other Debt Restructuring 217 14.14.5 Purchase of Debt Above the Market Value 217 14.15 Pension Funds (the Transfer of Pension Obligations) 218 14.15.1 Classification on National Accounts 218 References 220 Front Matter ....Pages i-xvii The Stability and Growth Pact and the New “Flexibility” Rules (Joaquim Miranda Sarmento)....Pages 1-35 Reforming Europe and the Euro Zone (Joaquim Miranda Sarmento)....Pages 37-45 The Fiscal Compact, the European Semester, and the Two-Pack and Six-Pack (Joaquim Miranda Sarmento)....Pages 47-67 Macroeconomic Imbalance Procedure (Joaquim Miranda Sarmento)....Pages 69-72 The National Accounts (Joaquim Miranda Sarmento)....Pages 73-82 What Changes in the ESA 2010? (Joaquim Miranda Sarmento)....Pages 83-89 Excessive Deficit Procedure (Joaquim Miranda Sarmento)....Pages 91-102 The General Government Sector in the National Accounts (Joaquim Miranda Sarmento)....Pages 103-118 The Different Fiscal Balances (Joaquim Miranda Sarmento)....Pages 119-122 The Time of Recording of Operations (Joaquim Miranda Sarmento)....Pages 123-130 Accounting for the Revenue in the National Accounts (Joaquim Miranda Sarmento)....Pages 131-148 Accounting of Expenditure in the National Accounts (Joaquim Miranda Sarmento)....Pages 149-155 Public Debt (Joaquim Miranda Sarmento)....Pages 157-161 Specific Cases (Joaquim Miranda Sarmento)....Pages 163-210 Back Matter ....Pages 211-217