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European Economics and Politics in the Midst of the Crisis pp 97–117Cite as

Fiscal Policy and Consolidation

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Abstract

The implementation of fiscal policies in the Eurozone and the European Union (EU) is critically restrained by: (a) The lack of effectiveness of collective bodies (i.e., there is no single governance or single legislature, and there are many levels of decisions). (b) The dominance of national economic policies. (c) The small scale of the resources mobilized through the European Fiscal Programs. Nevertheless, fiscal policy issues exist, irrespective of whether they are integrated or not within the context of the Eurozone and the EU. However, fiscal policy (particularly in the form of consolidations) is exerted in most Eurozone and EU countries. Therefore, studying the particularities of implementing it is a significant priority. This chapter examines the effectiveness of fiscal policy and whether austerity brings about expansionary or contractionary repercussions. It discusses the significance of the adjustment program composition (i.e., tax-based vs. spending-based), the size of fiscal multipliers at different stages of the economic cycle, and it refers to the liquidity trap and to the role of perceived risk and to the fact that austerity can become self-defeating. Finally, it studies the issue of synchronized fiscal adjustments, and examines the fiscal consolidation programs implemented in Europe.

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Notes

  1. 1.

    This applies to Austria, Belgium, Denmark, Finland, France, Germany, Italy, the Netherlands, Sweden and the United Kingdom. The exceptions are Ireland, Portugal and Spain because of the particular features setting them apart.

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Authors and Affiliations

  1. Department of Economics, University of Athens, Athens, Greece

    Panagiotis E. Petrakis, Pantelis C. Kostis & Dionysis G. Valsamis

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  1. Panagiotis E. Petrakis
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  2. Pantelis C. Kostis
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  3. Dionysis G. Valsamis
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Petrakis, P.E., Kostis, P.C., Valsamis, D.G. (2013). Fiscal Policy and Consolidation. In: European Economics and Politics in the Midst of the Crisis. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-41344-5_9

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  • DOI: https://doi.org/10.1007/978-3-642-41344-5_9

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