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PUBLIC DEBT AND THE EFFICIENCY OF FISCAL AND MONETARY POLICY1
Abstract
The government deficit and public debt are always a negative economic phenomenon as a consequence of non-compliance with fiscal discipline. Chronically recurring deficits and consequently resulting debts are the current topic discussed by theoretical and economic-political authorities. The Maastricht Treaty and the Stability and Growth Pact stipulate that the government deficit should not exceed 3 % of GDP and the public debt is considered excessive if it is higher than 60 % of GDP. The growth of the government deficit and public debt is a reflection of the absence of fiscal discipline and a lack of fiscal responsibility. In 2016, both in the EU-28 and in the euro area, there was an improvement in a public sector management and debt reduction in comparison with the previous year. The EU-28s government deficit-to-GDP ratio was -1.7 % in 2016 and the government debt-to-GDP ratio stood at 83.5 %. The lowest deficits were recorded in Ireland, Croatia and Denmark. Deficits of France and Spain have exceeded -3.0 % of GDP. In 2016, the lowest debt ratios were recorded in Estonia, Luxembourg, Bulgaria, Czech Republic, Romania and Denmark. A total of sixteen EU Member States recorded a debt ratio above 60 % of GDP. Slovakia recorded the government deficit of -1.7 % of GDP in 2016 and the public debt fell below 52 % of GDP. The high government debt slows down the economic growth and decreases the efficiency of the economy.
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