E62 - Fiscal PolicyReturn

The global financial crisis and the ensuing European debt crisis have exposed weaknesses in the structural fiscal stance of many European countries, where public debt has risen sharply over the past decade. At the same time, fiscal rules were reconsidered and adjusted, which did not consider the stabilizing function of fiscal policy important and allowed the governments of European countries to set pro-cyclical fiscal policies. Along with the implementation of new fiscal rules, politically independent national fiscal councils have also been established in the EU. An empirical analysis of compliance with fiscal rules in EU countries in 2002-2019 shows that only 55% of fiscal rules were complied with. At the same time, it seems that significant differences can be found between countries in terms of their tendency to comply with fiscal rules. The long-term negative consequences for fiscal policy were caused by the COVID-19 pandemic, which resulted in an average increase in debt relative to GDP of more than 10 percentage points.

The paper focuses on the reactions of economic policy to external and internal shocks. It refers to the current economic situation caused by the COVID-19 pandemic that generated a combination of internal and external negative economic shock and an unprecedented termination of some sectors or industries. The aim of the paper is to observe the change in economic policy responses over the last decade by comparing a monetary and fiscal policy responses after the outbreak of the global financial crisis in 2008 with the current economic situation. Most of the observed states indicated faster and stronger reactions of economic policy during the COVID-19 pandemic in comparison to the global financial crisis. The change may be explained by the expectation of a larger economic downturn caused by an abnormal negative shock, however a possible transformation in the ability of the economic policy to react should be also considered as a conceivable reason. The dynamics of the responses was observed especially in the case of fiscal policy, which corresponds to the consensus of the authors of the literature.

This aim of the article is to verify whether the crisis period 2008/2009 compared to the pre-crisis period of 2006/2007 significantly changed the average proportions of the main groups of taxes in EU countries, and whether development in tax mixes meet objectives of tax policy. It was found that a statistically significant increase occurred in the area of tax quota, significant change in the social security contributions, and significant decrease was observed in indirect taxation. The proportion of direct taxes also fell, but the decreasing is not statistically significant. The share of corporate tax revenues declined significantly, while personal income tax were unchanged. Changes in the average tax mix of EU countries are not always in line with expectations in terms of macroeconomic stabilization effects of taxes.