Skip to main content
×
×
Home

It Isn't Just about Greece: Domestic Politics, Transparency and Fiscal Gimmickry in Europe

  • James Alt, David Dreyer Lassen and Joachim Wehner
Abstract

This article analyzes the political origins of differences in adherence to the fiscal framework of the European Union (EU). It shows how incentives to use fiscal policy for electoral purposes and limited budget transparency at the national level, combined with the need to respond to fiscal rules at the supranational level, interact to systematically undermine the Economic and Monetary Union through the employment of fiscal gimmicks or creative accounting. It also explains in detail how national accounts were manipulated to produce electoral cycles that were under the radar of the EU budget surveillance system, and concludes with new perspectives on the changes to (and challenges for) euro area fiscal rules.

Copyright
Footnotes
Hide All
*

Department of Government, Harvard University (email: jalt@iq.harvard.edu); Department of Economics, University of Copenhagen (email: David.Dreyer.Lassen@econ.ku.dk); Department of Government, London School of Economics and Political Science (email: j.h.wehner@lse.ac.uk). We thank John Verrinder and especially Agota Krenusz for advice about Eurostat data. For comments or sharing data we thank Alberto Alesina, Roel Beetsma, Marco Cangiano, Tom Cusack, Achim Goerres, Mark Hallerberg, Tim Irwin, Mark Kayser, Vincent Koen, Ian Lienert, Gian Maria Milesi-Ferretti, Mike Seiferling, Francesco Trebbi, Paul van den Noord, Anke Weber and Joseph Weber, and seminar participants at Boston College, the University of Copenhagen, the Hertie School of Governance, Princeton, Stanford, the annual meeting of the European Political Science Association, and a conference hosted by the International Monetary Fund and the Swedish Ministry of Finance. Verena Kroth, Linnea Mills, Ed Poole and Soledad Prillaman provided research assistance. For financial support Wehner thanks the London School of Economics and Political Science Research Committee Seed Fund and STICERD, Alt thanks Harvard's Weatherhead Center and Lassen thanks the Economic Policy Research Network. The authors alone are responsible for any errors or misinterpretations. Online appendices and data replication sets are available at http://dx.doi.org/doi: 10.1017/S0007123414000064.

Footnotes
References
Hide All
Alesina Alberto Perotti Roberto. 1996. Fiscal Discipline and the Budget Process. American Economic Review 86 (2):401407.
Alt James E. Dreyer Lassen David. 2006a. Fiscal Transparency, Political Parties, and Debt in OECD Countries. European Economic Review 50 (6):14031439.
Alt James E. Lassen David Dreyer. 2006b. Transparency, Political Polarization, and Political Budget Cycles in OECD Countries. American Journal of Political Science 50 (3):530550.
Alt James E., Lassen David Dreyer Rose Shanna. 2006. The Causes of Fiscal Transparency: Evidence from the US States. IMF Staff Papers 53:3057.
Dai Xinyuan. 2002. Information Systems in Treaty Regimes. World Politics 54 (4):405436.
de Castro Francisco, Pérez Javier J., Rodríguez-Vives Marta. 2011. Fiscal Data Revisions in Europe. European Central Bank Working Paper 1342. Frankfurt: European Central Bank.
The Economist . 2011. Germany's Debt Brake: Tie Your Hands, Please. 10 December.
Feldstein Martin. 2012. The Failure of the Euro: The Little Currency That Couldn't. Foreign Affairs 91 (1):105116.
Frieden Jeffry, Pettis Michael, Rodrik Dani Zedillo Ernesto. 2012. After the Fall: The Future of Global Cooperation: Geneva Reports on the World Economy 14. London: Centre for Economic Policy Research.
Glennerster Rachel Shin Yongseok. 2008. Does Transparency Pay? IMF Staff Papers 55 (1):183209.
Hallerberg Mark. 2004. Domestic Budgets in a United Europe: Fiscal Governance from the End of Bretton Woods to EMU. Ithaca, NY: Cornell University Press.
Hallerberg Mark, Strauch Rolf von Hagen Jürgen. 2009. Fiscal Governance in Europe. Cambridge: Cambridge University Press.
Hyde Susan D. O'Mahony Angela. 2010. International Scrutiny and Pre-Electoral Fiscal Manipulation in Developing Countries. Journal of Politics 72 (2):690704.
Inman Robert P. Rubinfeld Daniel L.. 1994. The EMU and Fiscal Policy in the New European Community: An Issue for Economic Federalism. International Review of Law and Economics 14 (2):147161.
International Budget Partnership. 2010. Open Budgets. Transform Lives: The Open Budget Survey 2010. Washington, DC: International Budget Partnership.
Irwin Timothy C. 2012. Accounting Devices and Fiscal Illusions. IMF Staff Discussion Note SDN/12/02. Washington, DC: IMF.
Keohane Robert. 1984. After Hegemony: Cooperation and Discord in the World Political Economy. Princeton, NJ: Princeton University Press.
Koen Vincent, van den Noord Paul. 2005. Fiscal Gimmickry in Europe: One-off Measures and Creative Accounting. Economics Department Working Paper 417. Paris: OECD.
Lassen David D. 2010. Fiscal Consolidations in Advanced Industrialized Democracies: Economics, Politics, and Governance. Stockholm: Swedish Fiscal Policy Council.
McArdle Pat. 2012. The Euro Crisis: The ‘Fiscal Compact’ and Fiscal Policy. Working Paper 6. Dublin: Institute of International and European Affairs.
Milesi-Ferretti Gian Maria. 2004. Good, Bad or Ugly? On the Effects of Fiscal Rules with Creative Accounting. Journal of Public Economics 88 (1–2):377394.
Organisation for Economic Co-operation and Development. 2002. OECD Best Practices for Budget Transparency. OECD Journal on Budgeting 1 (3):714.
Rogoff Kenneth. 2012. A Euro Parable: The Young Couple With a Joint Account. Financial Times 24 April.
Savage James D. 2005. Making the EMU: The Politics of Budgetary Surveillance and the Enforcement of Maastricht. Oxford: Oxford University Press.
Seiferling Mike. 2013. Stock-Flow Adjustments, Government's Integrated Balance Sheet and Fiscal Transparency. IMF Working Paper WP/13/63.
von Hagen Jürgen Wolff Guntram B.. 2006. What Do Deficits Tell Us About Debt? Empirical Evidence on Creative Accounting With Fiscal Rules in the EU. Journal of Banking and Finance 30 (12):32593279.
Weber Anke. 2012. Stock-Flow Adjustments and Fiscal Transparency: A Cross-Country Comparison. IMF Working Paper WP/12/39.
Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

British Journal of Political Science
  • ISSN: 0007-1234
  • EISSN: 1469-2112
  • URL: /core/journals/british-journal-of-political-science
Please enter your name
Please enter a valid email address
Who would you like to send this to? *
×
Type Description Title
UNKNOWN
Supplementary materials

Alt Supplementary Material
Supplementary Material

 Unknown (27 KB)
27 KB
PDF
Supplementary materials

Alt Supplementary Material
Appendix

 PDF (1.4 MB)
1.4 MB
UNKNOWN
Supplementary materials

Alt Supplementary Material
Supplementary Material

 Unknown (290 KB)
290 KB

Metrics

Altmetric attention score

Full text views

Total number of HTML views: 5
Total number of PDF views: 208 *
Loading metrics...

Abstract views

Total abstract views: 775 *
Loading metrics...

* Views captured on Cambridge Core between September 2016 - 20th February 2018. This data will be updated every 24 hours.