Abstract
The scope of this study is to underline, within the current European context of economic and financial crisis, the importance and relevance of the sustainability of public finances, understood not only as an end in itself but also as a means of reaching that end, enabling the further development of society in general. Methodologically, because the subject has taken on a supranational significance, the present work will pay special attention to the EU legal framework in the first stage and then analyse the measures that have been taken in at-risk countries such as Portugal, in order to repair public finances at the local and national level. Concerning these measures, a critical attitude will be adopted, not only to highlight the importance of the increase in financial control and fiscal responsibility, but also to analyse the compatibility of some such measures with the national legal order.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
According to the European Commission (2012, p. 11), “limits to sustainability differ across countries and over time. The capacity to run high debts depends inter alia on the degree of development of financial markets, perceived risks, and trust in the capacity of a government to implement structural reforms and consolidate deficits. It also depends on the degree of global risk aversion and the attractiveness of investments alternative to government bonds”. Despite this understanding, we must not fail to point out that austerity policies were largely shaped by two Harvard economists, Reinhart and Rogoff (2010, p. 2), in which they argue for a relationship between public debt and growth, particularly when public debt exceeds 90 % of the GDP. According to these authors, “whereas the link between growth and debt seems relatively weak at normal debt levels, median growth rates for countries with public debt over 90 % of GDP are roughly one percent lower than otherwise”.
- 2.
See article 126.º of the Treaty on the Functioning of the European Union, the Protocol no. 12 on the excessive deficit procedure, the Council Regulation (EC) No. 1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies, and, more recently, the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union and the Council Directive 2011/85/EU of 8 November 2011 on requirements for budgetary frameworks of the member states.
- 3.
The budget deficit and the public debt must be faced lato sensu (as prescribed in the European System of accounts 1995—ESA 95), including not only the financial situation of the national bodies (specifically, the State itself and the central administration) but also all subnational levels of Government, as Regions, Municipalities and even the Social Security system.
- 4.
See, article 126. no. 3 and 5 of the Treaty.
- 5.
See article 126, ns. 6 to 11 of the Treaty.
- 6.
See article 3.º, n.º 1, al. a.
- 7.
See article 3.º, n.º 1, al. d. Article 3.º also stipulates “where the ratio of the general government debt to gross domestic product at market prices is significantly below 60 % and where risks in terms of long-term sustainability of public finances are low, the lower limit of the medium-term objective specified under point (b) can reach a structural deficit of at most 1 % of the gross domestic product at market prices”.
- 8.
See article 3.º, n.º 2. In case of non-compliance of this duty, the EU Court of Justice may apply sanctions on MS, at a level no less than 0.1 % of their GDP (article 8.º, n.º 2).
- 9.
See article 3.º, n.º 1, al. e.
- 10.
See article 7.º.
- 11.
Greece’s Memorandum dated 3 May 2010, Ireland’s 3 September of the same year and, finally, Portugal’s was ratified on 17 May 2011.
- 12.
Austerity is defined by Blyth (2013, p. 2), as “a form of voluntary deflation in which the economy adjusts through the reduction of wages, prices, and public spending to restore competitiveness, which is (supposedly) best achieved by cutting the state’s budget, debts, and deficits.”
- 13.
The similarity (materially and formally) between the three aforementioned Memoranda is not limited, however, to the adoption of a common matrix, going so far as to incorporating the text used. According to the notice published in the Portuguese newspaper “Público” 8 August 2013, “the agreements signed by Ireland and Portugal share 75 % of [the same] text, those signed by Greece and Ireland coincide on 77 % and those signed by Greece and Portugal 82 %”. Despite the similarities (which in fact exist), the three documents also display some differences between each other, namely in regard to the dimension of the measures aimed at the financial sector, which are more prominent in the Memoranda of Ireland and Portugal than in that of Greece.
- 14.
References
Bilbao G (2009) El control de las cuentas públicas. Thomson Reuters-Civitas, Navarra
Blyt M (2013) Austerity—the history of a dangerous idea. Oxford University Press, New York
Bouvier M (2010) Les finances locales. LGDJ, Paris
Bouvier M, Esclassan M, Lassale JP (2008) Finances publiques. LGDJ, Paris
Cavero T, Poinasamy K (2013) A cautionary tale. The true cost of austerity and inequality in Europe. Oxfam Brief Pap 174:1–38
European Commission (2010) Economic adjustment programme for Greece. Occas Pap 61:3–9
European Commission (2011a) Economic adjustment programme for Ireland. Occas Pap 76:6–18
European Commission (2011b) Economic Adjustment Programme for Portugal. Occas Pap 79:9–15
European Commission (2012) Fiscal sustainability report 2012. http://ec.europa.eu/economy_finance/publications/european_economy/2012/pdf/ee-2012-8_en.pdf. Accessed 1 Feb 2014
Franco S (2001) Finanças Públicas e Direito Financeiro—vol I. Almedina, Coimbra
Freitas da Rocha (2011) Portugal. In: Biziole G, Sacchetto C (eds) tax aspects of fiscal federalism: a comparative analysis. IBFD, Amsterdam
García-Alos Vacas L (2009) La responsabilidad contable de los gestores públicos y de los perceptores de subvenciones en la jurisprudencia. Claves de la Jurisprudencia, Madrid
Krugman P (2013) How the case for austerity has crumbled. http://www.nybooks.com/articles/archives/2013/jun/06/how-case-austerity-has-crumbled/. Accessed 1 Feb 2014
Levoyer L (2007) Finances locales. Hachette Livre, Paris
Lundqvist K (2013) Financial information of good quality, in time and for multiple uses—the Swedish experience. http://www.bportugal.pt/pt-PT/OBancoeoEurosistema/Eventos/Documents/Paper_Financial_information_of_good_quality20sep2013.pdf. Accessed 1 Feb 2014
Reinhart C, Rogoff K (2010) Growth in a time of debt. http://nber.org/papers/w15639.pdf?new_window=1. Accessed 1 Feb 2014
Reis R (2013) The Portuguese slump and crash and the Euro Crisis. Brookings papers on economic activity. Spring, 143–193
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2017 Springer International Publishing AG
About this chapter
Cite this chapter
Gomes, N. (2017). Sustainability and Public Finances in the Time of Austerity. In: Zacher, L. (eds) Technology, Society and Sustainability. Springer, Cham. https://doi.org/10.1007/978-3-319-47164-8_29
Download citation
DOI: https://doi.org/10.1007/978-3-319-47164-8_29
Published:
Publisher Name: Springer, Cham
Print ISBN: 978-3-319-47162-4
Online ISBN: 978-3-319-47164-8
eBook Packages: Earth and Environmental ScienceEarth and Environmental Science (R0)