View More View Less
  • 1 Péter Pázmány Catholic University Department of Economics Budapest Hungary
Restricted access

The main question of the paper, in the context of European economic governance reforms, is to assess whether strengthening fiscal institutions will resolve the problem of budgetary imbalances in countries prone to the deficit bias. The central argument is that the commitment behind the institutional changes — signaled by the composition of fiscal consolidation and the role of external actors — is critical for the success of reforms. In order to examine this thesis the contrasting experiences of Hungary and Slovakia are analyzed. While both have struggled with fiscal imbalances and eventually introduced far-reaching institutional reforms, these were successful in Slovakia while reversed in Hungary. The major implication of these cases is that changes in fiscal management cannot be treated as mere technicalities and are inseparable from the broader economic policy agenda. In countries where short-term considerations dominate decision-making, rules are implemented only under strong external pressure and are likely to be circumvented.

  • Alesina, A. — Perotti, R. (1995): Fiscal Expansions and Fiscal Adjustments in OECD Countries. NBER Working Paper No. 5214.

  • Alesina, A. — Perotti, R. — Tavares, J. (1998): The Political Economy of Fiscal Adjustments. Brookings Papers on Economic Activity 1: 197–266.

    Tavares J. , 'The Political Economy of Fiscal Adjustments ' (1998 ) 1 Brookings Papers on Economic Activity : 197 -266.

    • Search Google Scholar
  • Alesina, A. — Roubini, N. — Cohen, G. D. (1997): Political Cycles and the Macroeconomy. Cambridge, MA and London: MIT Press.

    Cohen G. D. , '', in Political Cycles and the Macroeconomy , (1997 ) -.

  • Alt, J. E. — Lassen, D. D. (2006): Transparency, Political Polarization, and Political Budget Cycles in OECD Countries. American Journal of Political Science 50(3): 530–550.

    Lassen D. D. , 'Transparency, Political Polarization, and Political Budget Cycles in OECD Countries ' (2006 ) 50 American Journal of Political Science : 530 -550.

    • Search Google Scholar
  • Balassone, F. — Francese, M. (2004): Cyclical Asymmetry in Fiscal Policy, Debt Accumulation and the Treaty of Maastricht. Rome: Banca d’Italia.

    Francese M. , '', in Cyclical Asymmetry in Fiscal Policy, Debt Accumulation and the Treaty of Maastricht , (2004 ) -.

  • Benczes, I. (2008): Trimming the Sails: The Comparative Political Economy of Expansionary Fiscal Consolidations. Budapest and New York: Central University Press.

    Benczes I. , '', in Trimming the Sails: The Comparative Political Economy of Expansionary Fiscal Consolidations , (2008 ) -.

  • Benczes, I. (2011): Market Reform and Fiscal Laxity in Communist and Post-Communist Hungary: A Path-dependent Approach. International Journal of Emerging Markets 6(2): 118–131.

    Benczes I. , 'Market Reform and Fiscal Laxity in Communist and Post-Communist Hungary: A Path-dependent Approach ' (2011 ) 6 International Journal of Emerging Markets : 118 -131.

    • Search Google Scholar
  • Brender, A. — Drazen, A. (2005): Political Budget Cycles in New versus Established Democracies. Journal of Monetary Economics 52(7): 1271–1295.

    Drazen A. , 'Political Budget Cycles in New versus Established Democracies ' (2005 ) 52 Journal of Monetary Economics : 1271 -1295.

    • Search Google Scholar
  • Buchanan, J. — Wagner R. (1977): Democracy in Deficit: The Political Legacy of Lord Keynes. San Diego and London: Academic Press.

    Wagner R. , '', in Democracy in Deficit: The Political Legacy of Lord Keynes , (1977 ) -.

  • Crampton, R. J. (1994): Eastern Europe in the Twentieth Century — and After. London and New York: Routledge.

    Crampton R. J. , '', in Eastern Europe in the Twentieth Century — and After , (1994 ) -.

  • Csaba, L. (2012): Revisiting the Crisis of the EMU: Challenges and Options. Zeitschrift für Staatsund Europawissenschaften 10(1): 53–77.

    Csaba L. , 'Revisiting the Crisis of the EMU: Challenges and Options ' (2012 ) 10 Zeitschrift für Staatsund Europawissenschaften : 53 -77.

    • Search Google Scholar
  • Darvas, Z. — Kostyleva, V. (2011): The Fiscal and Monetary Institutions of CESEEE Countries, OECD Journal on Budgeting 11(1): 147–185.

    Kostyleva V. , 'The Fiscal and Monetary Institutions of CESEEE Countries ' (2011 ) 11 OECD Journal on Budgeting : 147 -185.

    • Search Google Scholar
  • European Commission (2007): Public Finances in EMU 2007. Brussels: EC Directorate-General for Economic and Financial Affairs.

    '', in Public Finances in EMU 2007 , (2007 ) -.

  • European Commission (2009): Public Finances in EMU 2009. Brussels: EC Directorate-General for Economic and Financial Affairs.

    '', in Public Finances in EMU 2009 , (2009 ) -.

  • European Commission (2010): Public Finances in EMU 2010. Brussels: EC Directorate-General for Economic and Financial Affairs.

    '', in Public Finances in EMU 2010 , (2010 ) -.

  • European Commission (2011): Statistical Annex of European Economy Autumn 2011. Brussels: EC Directorate-General for Economic and Financial Affairs.

    '', in Statistical Annex of European Economy Autumn 2011 , (2011 ) -.

  • European Council (2005): Improving the Implementation of the Stability and Growth Pact. Brussels: European Council.

    '', in Improving the Implementation of the Stability and Growth Pact , (2005 ) -.

  • Fabrizio, S. — Mody, A. (2010): Breaking the Impediments to Budgetary Reforms: Evidence from Europe. Economics & Politics 22(3): 62–392.

    Mody A. , 'Breaking the Impediments to Budgetary Reforms: Evidence from Europe ' (2010 ) 22 Economics & Politics : 62 -392.

    • Search Google Scholar
  • Fisher, S. — Gould, J. — Haughton, T. (2007): Slovakia’s Neoliberal Turn. Europe-Asia Studies 59(3): 977–998.

    Haughton T. , 'Slovakia’s Neoliberal Turn ' (2007 ) 59 Europe-Asia Studies : 977 -998.

  • Giavazzi, F. — Pagano, M. (1990): Can Severe Fiscal Consolidations be Expansionary? Tales of Two Small European Countries. NBER Working Paper No. 3372.

  • Greskovits, B. (2008): Hungary and Slovakia: Compliance and its Discontents, in Dyson, K. (ed.), The Euro at 10: Europeanization, Power, and Convergence. Oxford: Oxford University Press, pp. 274–292.

    Greskovits B. , '', in The Euro at 10: Europeanization, Power, and Convergence , (2008 ) -.

  • Guichard, S. — Kennedy, M. — Wurzel, E. — André, C. (2009): What Promotes Fiscal Consolidation: OECD Country Experiences, in Larch, M. (ed.), Achieving and Safeguarding Sound Fiscal Positions. Economic Papers No. 377. Brussels: EC Directorate-General for Economic and Financial Affairs, pp. 60–90.

    André C. , '', in Achieving and Safeguarding Sound Fiscal Positions , (2009 ) -.

  • Gyõrffy, D. (2007): Deficit Bias and Moral Hazard on the Road to the EMU: The Political Dimension of Fiscal Policy in Hungary. Post-Communist Economies 19(1): 1–16.

    Gyõrffy D. , 'Deficit Bias and Moral Hazard on the Road to the EMU: The Political Dimension of Fiscal Policy in Hungary ' (2007 ) 19 Post-Communist Economies : 1 -16.

    • Search Google Scholar
  • Gyõrffy, D. (2009): Structural Change Without Trust: Reform cycles in Hungary and Slovakia. Acta Oeconomica 59(2): 147–177.

    Gyõrffy D. , 'Structural Change Without Trust: Reform cycles in Hungary and Slovakia ' (2009 ) 59 Acta Oeconomica : 147 -177.

    • Search Google Scholar
  • Horváth, M. — Ódor, L. (2009): Making Fiscal Commitments Credible. Institutions for a Responsible and Transparent Fiscal Policy in Slovakia. Bratislava: National Bank of Slovakia.

    Ódor L. , '', in Making Fiscal Commitments Credible. Institutions for a Responsible and Transparent Fiscal Policy in Slovakia , (2009 ) -.

  • IMF (2001): Fiscal Improvement in Advanced Economies: How Long Will it Last?, in: World Economic Outlook May 2001. Washington: International Monetary Fund, pp. 85–115.

    '', in World Economic Outlook May 2001 , (2001 ) -.

  • IMF (2005): Hungary — Staff Report for the 2005 Article IV Consultation. IMF Country Report No. 05/213. Washington: International Monetary Fund.

    '', in Hungary — Staff Report for the 2005 Article IV Consultation , (2005 ) -.

  • Istvánffy, H. (1992): Foreign Debt, Debt Management Policy and Implications for Hungary’s Development. Europe-Asia Studies 44(6): 997–1013.

    Istvánffy H. , 'Foreign Debt, Debt Management Policy and Implications for Hungary’s Development ' (1992 ) 44 Europe-Asia Studies : 997 -1013.

    • Search Google Scholar
  • Kontopoulos, Y. — Perotti, R. (1999): Government Fragmentation and Fiscal Policy Outcomes: Evidence from OECD Countries, in: Poterba, J. — von Hagen, J. (eds), Fiscal Institutions and Fiscal Performance. Chicago and London: University of Chicago Press, pp. 81–102.

    Perotti R. , '', in Fiscal Institutions and Fiscal Performance , (1999 ) -.

  • Kopits, G. (2001): Fiscal Rules: Useful Policy Framework or Unnecessary Ornament? IMF Working Paper No. 01/145.

  • Kraan, D. J. — Bergvall, D. — Hawkesworth, I. — Krause, P. (2006): Budgeting in Hungary. OECD Journal on Budgeting, 6(3): 1–61.

    Krause P. , 'Budgeting in Hungary ' (2006 ) 6 OECD Journal on Budgeting : 1 -61.

  • Molander, P. (2000): Reforming Budgetary Institutions: Swedish Experiences, in: Strauch, R — von Hagen, J. (eds), Institutions, Politics and Fiscal Policy. Dordrecht and Norwell: Kluwer Academic Publishers Group, pp. 191–214.

    Molander P. , '', in Institutions, Politics and Fiscal Policy , (2000 ) -.

  • Molander P. (2001): Budgeting Procedures and Democratic Ideals: An Evaluation of Swedish Reforms. Journal of Public Policy 21(1): 23–52.

    Molander P. , 'Budgeting Procedures and Democratic Ideals: An Evaluation of Swedish Reforms ' (2001 ) 21 Journal of Public Policy : 23 -52.

    • Search Google Scholar
  • OECD (2003): Fiscal Stance over the Cycle: The Role of Debt, Institutions and Budget Constraints, in: OECD Economic Outlook 74. Paris: OECD, pp. 125–142.

    '', in OECD Economic Outlook 74 , (2003 ) -.

  • OECD (2005): Hungary 2005. Paris: OECD.

    '', in Hungary 2005 , (2005 ) -.

  • State Audit Office Hungary (2004): Jelentés a Magyar Köztársaság 2003. évi költségvetése végrehajtásának ellenõrzésérõl [Audit report on the implementation of the 2003 budget in Hungary]. Budapest: State Audit Office of Hungary.

    '', in Jelentés a Magyar Köztársaság 2003. évi költségvetése végrehajtásának ellenõrzésérõl , (2004 ) -.

  • Tóth, J. (2000): Fiscal Policy, in: Marcincin, A. — Beblavy, M (eds), Economic Policy in Slovakia 1990–1999. Bratislava: Institute for Economic and Social Reforms, pp. 60–93.

    Tóth J. , '', in Economic Policy in Slovakia 1990–1999 , (2000 ) -.

  • Von Hagen, J. (1992): Budgeting Procedures and Fiscal Performance in the EC. Economic Papers No. 96. Brussels: EC Directorate-General for Economic and Financial Affairs.

    Hagen J. , '', in Budgeting Procedures and Fiscal Performance in the EC , (1992 ) -.

  • Weingast B. — Shepsle, K. — Johnsen, C. (1981): The Political Economy of Benefits and Costs: A Neoclassical Approach to Distributive Politics. The Journal of Political Economy 89(4): 642–664.

    Johnsen C. , 'The Political Economy of Benefits and Costs: A Neoclassical Approach to Distributive Politics ' (1981 ) 89 The Journal of Political Economy : 642 -664.

    • Search Google Scholar
  • World Bank (2007). Implementation Completion and Results Report (IBRD-71780) on a loan in the amount of Euro 5.0 million to the Slovak Republic for a public finance management project, Washington: The World Bank. Available at: http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2007/07/18/000020953_20070718100746/Rendered/PDF/ICR0000484.pdf

    '', in Implementation Completion and Results Report (IBRD-71780) on a loan in the amount of Euro 5.0 million to the Slovak Republic for a public finance management project , (2007 ) -.

  • Zachar, D. (2004). Reforms in Slovakia 2003-2004. Evaluation of Economic and Social Measures. Bratislava: Institute for Economic and Social Reforms.

    Zachar D. , '', in Reforms in Slovakia 2003-2004. Evaluation of Economic and Social Measures , (2004 ) -.