PFM Articles 
The Global Financial Crisis and Public Finances in the New EU Countries in Central and Eastern Europe: Developments and Challenges
KARSTEN STAEHR
PFM, Vol. 10 No. 4,
(2010)
This paper discusses the public finances of the 10 new EU countries from Central and Eastern Europe, with particular emphasis on the effects of the global financial crisis that started in 2008. The budget outcomes have differed markedly across the new EU countries, both before and during the crisis. The direct impact of the crisis on public finances was limited, but the severe downturns have strained public finances and increased debt ratios. Estimations of budget reaction functions reveal that the overall budget balance has, in general, been moderately counter-cyclical, but also that the counter-cyclicality derives entirely from the revenue side. The medium-term fiscal outlook rests, to a large extent, on the prospects for growth. The uncertainties regarding future economic growth and stability in financial markets suggest that several of the new EU countries need to tighten fiscal policies as a medium-term prudential measure.
Subscribers: Login to read this article
Guests: Subscribe to PFM, or purchase individual article access for $10.
The article is not available for automatic download. We will email the article to you as a PDF file upon receiving your payment, typically within 24 hours.
