Stability of public finances of the EU states

Abstract

Introduction. Public finance is a fundamental mechanism of the government’s influence on socio-economic processes. By regulating the main finan­cial indicators, macroeconomic stability is ensured and the foundations for long-term economic growth are laid.

Problem. Under modern conditions, it is important to outline the promising directions for the development of public finances in the EU countries, taking into account the results of the analysis of the budget and tax policy, implemented measures of financial provision of social protection of the population, strategic documents of the member states and the EU as a whole.

The aim of the article is to determine the main priorities for the development of public finances of the EU member states for the medium-term perspective, taking into account modern social challenges and macroeconomic trends.

Methods. Methods of analysis and synthesis, generalization, systematization, scientific abstrac­tion, the methods of economic and mathematical modeling are applied.

Results. The authors compared the state of public finances of 23 EU member states during the financial recession of 2008–2009 and the Corona­virus pandemic. The pecu­liarities of the applied discretionary fiscal policy measures in these periods were identified. The indicator of the ratio between the state debt and the gross domestic product was under study. The influence of the state debt on the economic growth indicator in 2007–2021 was assessed. The main approaches to reducing the gross indicator of the state debt were determined. The main priorities for the development of public finances were substantiated.

Conclusions. Since the beginning of the COVID-19 pandemic, the EU member states were noted to apply an agreed and coordinated fiscal policy, which allowed increasing its effect­tiveness level. Under modern conditions, public finances play a significant role in the imple­mentation of tasks related to increasing defense capability and accelerating economic growth. The priority of EU financial policy is to ensure the stability of public finances. The implementation of conservative rules regarding the mana­gement of fiscal deficit and public debt is of utter importance. It seems appropriate to gradually reduce the budget deficit and the share of GDP redistribution through the public finance system in order to ensure balanced budget console­dation in the medium term, to develop the insti­tutional foundations of social policy, and to improve coordination with the fiscal policy.