INSTITUTIONAL AND POLITICAL FACTORS OF FISCAL CONSOLIDATION

Ljubinka Joksimovic

Faculty of Economics, University of Belgrade, Belgrade, Serbia

The financial crisis in several European countries has turned into a full blown sovereign debt crisis. The current trends of public debt burdens per capita could be averted, but not by relying primarily on economic growth, for which the outlook is bleak in the near term. The best approach to solving the crisis is not through growth, but through a serious – and undoubtedly painful – process of fiscal consolidation to reduce government deficits and debts accumulation. After the short consideration of the recent fiscal and debt positions of six South-Eastern European (SEE) countries, placing an emphasis on the Republic of Serbia, the paper analyzes which institutional and political factors can lend credibility to consolidation efforts and underpin the commitment to financial sustainability.

Keywords: fiscal consolidation, credibility, rules, institutions, SEE countries

JEL Classification: G01, H62, H63, H68, P52

Economic Horizons, 2012, Vol. 14, No. 2, pp. 91-100.   doi:10.5937/ekonhor1202089J