Abstract
In the throes of the ongoing global pandemic and related government interventions, this chapter explores and analyses the possibility that the applicability of the European Union’s (EU) Stability Growth Pact (SGP) may need to be revised to adopt a balance sheet approach. The methodology adopted for this study entailed an analysis of statistical data submitted by EU member states to the European Commission on general government net lending/borrowing, debt and overall financial position. As expected, a substantial difference was observed between the 2020 data and the established trend in prior years. As they stand, the SGP rules appear too restrictive. In fact, they had to be suspended as soon as the pandemic hit EU member states in March 2020. Future changes should include the requirement for member states to build buffers, which would be available in times of crises and to take a more balance sheet–based approach to fiscal management. Furthermore, it could also be considered that the SGP takes a more principles-based approach (instead of a rules-based approach) and sets standards that could then be applied according to the circumstances of each member state.
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Notes
- 1.
The fiscal policy interventions announced by Italy, the UK, Japan and Turkey were dominated by ‘below the line interventions’. On the other hand, the interventions of the US and New Zealand were mainly direct fiscal expenditures, with very minimal ‘below the line’ interventions (Metcalfe & Taylor, 2020, p. 30).
- 2.
These data do not include public corporations, and therefore COVID-19-related interventions conducted by public corporations will not be reflected directly.
- 3.
- 4.
For example, a note on the stock-flow adjustment, which explains the link between EDP tables, is published by Eurostat on its website to explain these adjustments for the period considered 2016–2019. Refer to: https://ec.europa.eu/eurostat/documents/1015035/10710640/SFA-PR-2020-Apr.pdf/8ca06461-ea44-8cf4-93e2-49f59f5c7b01
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Dabbicco, G., Caruana, J. (2022). The Role of the Balance Sheet for Reporting Deficits and Debts by EU Member States: Lessons from the COVID-19 Pandemic. In: Dabbicco, G., Bisogno, M., Caruana, J., Christiaens, J. (eds) Public Sector Accounting, Financial Accountability and Viability in Times of Crisis. Public Sector Financial Management. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-031-04745-9_3
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