Within only a few years, the four Scandinavian countries and the U. K. succeeded in turning high budget deficits into surplus without impairing GDP growth and employment. A key role in the consolidation process played a boom in private consumption triggered mainly by a liberalization of credit markets coupled with tax deductability of interest rates. While the example of the five countries shows that government deficits do not by necessity put a higher burden on future generations, there is one decisive drawback: In every case the consumption boom led to severe problems in the current external account. Budget deficits are particularly high in Italy and the smaller EC countries. Also on other policy-relevant indicators the smaller EC economies tend to perform less well than the members of EFTA and the major EC countries.
Budgetsanierung in Europa; Budget Consolidation in Western Europe
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