This is the time of the public sector. When the world has not recovered yet from the financial crisis, several developed countries are facing fiscal situations that seem to be unsustainable in the long term. The paradox is that, whereas most of the emerging countries show relatively solid fiscal situations, the alarm signals are going off in some of the most advanced countries. Thus, it is about old problems personified by new actors, to the extent that many people talk about an explosion of the debt bubble never seen before, but this time, in the industrialized world.

The financial crisis that started two years ago is not detached from the present fiscal crisis. The 2008-2009 recession was the result of a financial lack of control and it became evident, among other effects, by an excessive debt accumulation in the most advanced economies which, as we now know, were consuming more than they should have. The actions taken to alleviate this crisis were based on strong fiscal boosts and the socialization of the private sector losses. These expansive monetary policies that were a result of the low interest rates and the consequent soft loans, caused, particularly in some developed countries that had been exhibiting unbalanced fiscal accounts long before the crisis, deficits that exceed 10% of the GDP, with an increasing trend.

The tip of the iceberg of the current fiscal crisis was Greece. In spite of Germany’s initial rejection to the idea of rescue, based on the theory of moral risk when an actor does not assume the responsibility for the consequences of its acts, Greece’s situation, which was close to default, with its US$ 450 billion in public debt, has put the European Union into alert about the danger of an untidy default that might lead to a systemic crisis. But Greece is not alone. Spain, Portugal, the United Kingdom, Ireland and Iceland are the target of nervous public bond holders, who fear these countries might not honor the obligations deriving from their large debts. Some time ago, Juergen Stark, the President of the Executive Board of the European Central Bank, had warned that “the eurozone could face a sovereign debt crisis if the governments did not achieve the reduction of their budget deficits”; however, it would not be rare that Japan and the United States also joined the group of developed countries exposed to the implacable rules of a very sensitized market that pays a lot of attention to the status of public accounts and is cruel with the weakest, from the point of view of the fiscal situation.

The European Union has implemented an important assistance program, prepared almost unwillingly by Germany and France, to which the International Monetary Fund will also contribute. The German establishment fears that the rescue requests will become a bottomless barrel, and reasonably argues that the Euro architects provided a clause that prohibits rescues with the intention of strengthening the Stability and Growth Agreement. Therefore, it is clear that the rescue plans will be exchanged by promises of austerity programs. Some governments have already announced them, but there are observers who point out that these programs make the burden of the crisis fall only on the citizens, and that they will not be enough unless debts are also restructured, so that the financial sector takes charge of part of the costs.

Structural reforms are also being mentioned. This includes, in the case of Europe, a battle to increase productivity so that the continent is not left out of the game in ten or twenty years, as recently warned by the managing director of the IMF, Dominique Strauss-Kahn. It is not a simple task and certainly, there will be strong resistance to the necessary budgetary adjustments and/or tax increases that many governments will try to apply, in addition to the mentioned salary reductions to lower costs, and a devaluation of the common currency which will surely be inevitable. Europe’s political and social situation will be very complicated in upcoming times, especially because it is a continent threatened by the strains emerging from the need of reforming the state, within the framework of a steadily aging population, which obliges to increase the services that the public sector must provide, whereas their incomes are going down. In a nutshell, many claims and few resources will constitute the sign of the times to come, when it will be necessary to apply programs not impossible to comply with. This is a big challenge for specialists in budgeting and public finance.

It is likely that some of the subjects developed in the articles included in the present issue of the International Journal of Public Budget contribute, at least partially, to the solutions of the problems at hand.

The article written by Jorge Rodríguez, Michael Jorratt and Cristóbal Gamboni, titled Public finance in Chile: Performance during the period 2006-2009, in prospect, consists of a review of the results obtained in that country, with reference to public finance starting from the institutional consolidation of the so called “policy of structural balance”, associated to the principle of fiscal accountability, which proved to be effective in both stages of the economic cycle and allowed this country to save money during the copper price boom and “dessave”, if the neologism is admitted, during the global economic crisis.

Hernán Llosas’s paper, titled Recent reforms in the US budgeting system, analyzes the noticeable changes in the American budgeting system since the 1993 reform, which started with the approval of the Government Performance and Results Act. This law, a result of a Congress initiative, assigned the General Office of Accountability the responsibility of auditing and assessing its compliance, and thus, according to the author, it produced a Copernican change in that country´s budgeting system.

Richard Blanco Peck is the author of an interesting paper titled Fiscal policy in Puerto Rico and its electoral consequences. This research is aimed to demonstrate that the policy of supplying funds coming from the United States has direct impact over the electoral tendency in Puerto Rico. The methodology used in this study is a contrastive analysis throughout 15 electoral years, which exhibits a positive correlation between the percentage of federal funds allocated to the Free and Associated State of Puerto Rico, per each electoral year, from 1952 to 2008, and the percentage of votes obtained by the political forces, by means of Pearson Correlation Coefficient. Other techniques have been used to compare and observe changes between the results of this study and others performed in 1978 and 2006; Blanco Peck’s thesis being that the increase of federal funds in the budget is directly related to the increase of votes, in favor of the ideals that support the annexation to the United States.

With these valuable contributions, the International Journal of Public Budget encourages the discussion and debate of issues which are central to the task of public finance and budgeting techniques.