Title: A politico-economic perspective on financial sustainability
Authors : Slembeck, Tilman
Jans, Armin
Leu, Thomas
Published in : Journal of public budgeting, accounting & financial management
Volume(Issue) : 26
Issue : 1
Pages : 140
Pages to: 164
Publisher / Ed. Institution : Emerald
Issue Date: 2014
License (according to publishing contract) : Licence according to publishing contract
Type of review: Peer review (Publication)
Language : English
Subjects : Sustainability; Budgeting; Dept; Finance
Subject (DDC) : 320: Politics
332: Financial economics
Abstract: Financial sustainability requires governments to run sufficiently large primary surpluses going forward to cover the cost of servicing its debt budgets to balance in the long run. In democracies, politicians who strive for reelection often tend to systematically violate this tenet. This paper discusses two types of “anchors” that may be used to cope with this problem by limiting the room for new and excessive public debt. First, we analyze national constitutional safeguards on the basis of the “debt brake” in Switzerland and Germany. Second, we discuss international institutions to maintain financial discipline, referring to the Maastricht-criteria. These anchors are designed to allow policymakers to commit to policies that provide long term financial stability and sustainability of public finances. However, as the recent crises have shown, the problem of time inconsistency in policy making remains, especially when anchors are weak. Therefore, the paper discusses the circumstances under which institutional anchors may help to restrict politician behavior to promote sustainability of public finances. We conclude by indentifying three conditions required for the proper functioning of collective anchors in the context of public finances.
Departement: School of Management and Law
Organisational Unit: Center for Economic Policy (FWP)
Publication type: Article in scientific Journal
DOI : 10.1108/JPBAFM-26-01-2014-B006
ISSN: 1096-3367
1945-1814
URI: https://digitalcollection.zhaw.ch/handle/11475/9634
Appears in Collections:Publikationen School of Management and Law

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