January 2019

Why Quality of Public Finance Matters in Europe

In a new policy brief released as finance ministers gather in Brussels for the 21-22 January eurogroup/ecfin meetings, Chief Economist Alessandro Leipold calls for a dramatic increase in the role and political attention awarded to a vital but crucial policy lever: the quality of public finance. Drawing on recent research from the OECD, a 10-year European Commission investigation into the role and importance of public finance as well as the conclusions of The 2018 Euro Summit, convened by the Lisbon Council in December 2018, Chief Economist Leipold explains the increasing importance of improved performance across the eurozone/EU in this decisive area. With total public revenue and spending averaging 46% to 47% of gross domestic product in euro area countries, the quality of its composition matters much more than the decimal over-run of any deficit (or surplus). He proposes a five-point programme for better eurozone governance to eurogroup/EU finance ministers.