Public Investment, Growth and Fiscal Constraints

Public Investment, Growth and Fiscal Constraints

Challenges for the EU New Member States

Edited by Massimo Florio

This book makes a unique contribution in advancing understanding of the fiscal condition and growth potential of the New Member States of the European Union. It provides new data, policy evaluation, and offers national and regional perspectives. The core research questions are the effect of public investment in the context of macroeconomic disequilibrium and how it is possible to finance capital accumulation in the present and future conditions of mounting public sector debt.

Chapter 4: Patterns and Trends of Public Investment in the New Member States of the European Union

Ángel Catalina Rubianes

Subjects: economics and finance, public finance, regional economics, urban and regional studies, regional economics


Ángel Catalina Rubianes INTRODUCTION Due to a number of reasons, public expenditure is lower in New Member States (NMS) than in the EU-15 countries. Lower social protection in NMS is a key source of the difference. Nevertheless, despite restrictions on total expenditure, public investment is on average higher in NMS in terms of GDP. This higher investment can be linked to a significant extent to the support from the EU Cohesion Policy, which accounts in NMS for 75 per cent of environmental protection and 10 per cent of economic affairs and human capital investment. Following the economic crisis, public investment is under pressure and declining in NMS, underlining the importance of continued efforts under the European cohesion policy. Article 174 of the new Treaty of Lisbon empowers the European Community to promote its harmonious development through actions which strengthen economic, social and territorial cohesion and, thus, reduce disparities between the levels of development of the various regions. Article 175 also involves Member States in this role by asking them to conduct their economic policies in such a way as to attain the objectives set out in Article 174. Public spending is one of the most typical actions of the public sector to promote development and to tackle disparities across regions. Spending policies can be carried out in the context of a specific regional policy or, on the contrary, through spatially-blind decisions which do not aim specifically at addressing regional disparities. Regardless of their specific policy objectives virtually all public spending...

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