A Public Choice Perspective
Edited by Giuseppe Eusepi and Friedrich Schneider
Chapter 2: Indebtedness and deficits of the nations of the European Union
2. Indebtedness and deﬁcits of the nations of the European Union Peter Bernholz 1. INTRODUCTION The subject of this chapter is relatively simple. First it examines the facts concerning the development and the present state of the deﬁcits and debts of the member states. Second, we have to ask ourselves under what conditions this situation can be maintained, in the sense that indebtedness as a percentage of GDP does not increase in the future. Related to this topic, we must ask whether the conditions of the European Stability Pact are suﬃcient for this purpose. Third, related to this is the question of what problems may turn up as a result of the age structure of the population and the old age pension systems. A ﬁnal problem may be the costs of the enlargement of the Union. 2. THE DEVELOPMENT OF DEBTS AND DEFICITS The development of the debts and deﬁcits of the member states as percentages of GDP during recent years is shown in Figures 2.1 and 2.2. On the whole, developments seem to be positive for the period from 1998 to 2000. Indeed, before the downturn of economic activity beginning in 2001 deﬁcits decreased in all countries. In this sense, the Maastricht Conditions and the Stability Pact may have had a positive inﬂuence. But ﬁrst, the public debts of France, Germany and Austria stagnated, and that of Greece even increased slightly. Second, the Belgian, Italian and Greek debts as a percentage of GDP...
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