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EXTENT OF THE CRISIS AND POST-CRISIS CONSOLIDATION OF PUBLIC FINANCES IN GREECE, ITALY, BELGIUM AND PORTUGAL IN 2009 – 2018

B. Mucha-Leszko

Abstract

The subject of this paper is an analysis and evaluation of the consequences of the financial and economic crisis in 2008-2009 for the public finances in the euro area members which in 1998 (during the qualification to the common currency area) had not fulfilled the treaty criterion of public debt. Their debt ratio to GDP was close to or surpassed 100%. This pertained to: Belgium, Greece and Italy. The research also covers Portugal as after the introduction of the euro and since the recession of 2001-2003 the country also surpassed the allowed government deficit threshold and had an increasing ratio of public debt. The evaluation includes the effects of post-crisis public finance consolidation in the aforementioned countries. The basis of the assessment is the budget deficit and debt in 2009-2019 and comparison of consolidation paths of selected countries with scenarios of diminishing public debt constructed by Ad van Riet in 2010. The analysis allowed to draw a conclusion that the largest cost of the crisis in the form of declining GDP and growing public debt occurred in: Greece, Portugal and Italy. Confrontation of the chose paths of diminishing debt with the scenarios of public finance consolidation constructed by Ad van Riet in 2010 led to the following conclusions: 1) the path in Belgium was close to the moderate scenario (blue), 2) the paths in Greece and Italy were partly similar to the pessimistic scenario (red), except since 2016 their debt ceased to grow and even slightly declines and the scenario foresaw an increase of debt until 2030. 3) the Portuguese path does not fit any of the three scenarios, the peak of the debt was in 2014 and since than it has been declining, but slower than foreseen in the moderate scenario.

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