Fiscal Governance in Europe

Based on data from European Union countries, this book presents a theoretical framework to discuss how governments coordinate budgeting decisions.

Mark Hallerberg (Author), Rolf Rainer Strauch (Author), Jürgen von Hagen (Author)

9780521857468, Cambridge University Press

Hardback, published 16 March 2009

246 pages
23.5 x 16 x 2.1 cm, 0.48 kg

'In Fiscal Governance in Europe, Hallerberg, Strauch, and von Hagen shed new light on how governments might successfully address the 'common resource pool problem' of debt restraint in the face of political incentives to maximize tax-financed constituency benefits. The answer is centralization of budget procedures through either 'delegation' or 'contracts' institutions. Yet, the authors show that the political context of centralized fiscal institutions is crucial. Where one-party governments prevail, delegation of authority to the finance minister is appropriate. In multiparty systems, the contracts approach of negotiated multi-year targets is the preferred form of centralization. When political context and institutions diverge, benefits from centralization decline. The authors draw on extensive data, including surveys of EU national policy makers, and expertly employ formal methods, econometric analysis and case studies to develop and assess their theory, and to draw compelling conclusions and recommendations for policy makers. Indeed, this excellent book can be strongly recommended to practitioners as well as scholars and advanced students in the areas of public finance and budgeting as well as of political economy, public policy, and comparative and European politics.' Duane Swank, Marquette University

This book presents a theoretical framework to discuss how governments coordinate budgeting decisions. There are two modes of fiscal governance conducive to greater fiscal discipline, a mode of delegation and a mode of contracts. These modes contrast with a fiefdom form of governance, in which the decision-making process is decentralized. An important insight is that the effectiveness of a given form of fiscal governance depends crucially upon the underlying political system. Delegation functions well when there are few, or no, ideological differences among government parties, whereas contracts are effective when there are many such differences. Empirically, delegation and contract states perform better than fiefdom states if they match the underlying political system. Additional chapters consider why countries have the fiscal institutions that they do, fiscal governance in Central and Eastern Europe, and the role of such institutions in the European Union.

1. Introduction
2. Electoral and fiscal institutions and forms of fiscal governance
3. An account of fiscal norms and rules in the European Union from 1985 to 2004
4. How forms of fiscal governance affect fiscal performance
5. Why do countries have different fiscal institutions?
6. Institutional choice in new democracies: fiscal governance in Central and East European countries
7. EMU and fiscal governance in Europe
8. Conclusion.

Subject Areas: International economics [KCL], Comparative politics [JPB], Politics & government [JP]