Asymmetry and the Role of the Public Sector

Abstract

We consider two contrasting issues relating to the role of the public sector in this chapter. The first relates to the role of the public sector in the economy and the symmetric pressures that fall upon it. The second relates to the EU as a whole and a problem of ‘aggregation’. In this second case, it is argued that a degree of coordination among the EU countries may ease the fiscal problems of each of the member states because of the spill over benefits. There is a third issue, namely, asymmetries to the balance of fiscal policy, which are reflected in the highly asymmetric nature of the Stability and Growth Pact in the EU that guards against excessive deficits without any matching restraints on surpluses. However, this is such a significant topic that it has its own chapter (Chapter 9). So we begin with the asymmetric pressure on fiscal policy.