Normal 0 21 false false false ES-TRAD X-NONE X-NONE /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Tabla normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-priority:99; mso-style-parent:""; mso-padding-alt:0cm 5.4pt 0cm 5.4pt; mso-para-margin-top:0cm; mso-para-margin-right:0cm; mso-para-margin-bottom:10.0pt; mso-para-margin-left:0cm; mso-pagination:widow-orphan; font-size:12.0pt; font-family:"Cambria","serif"; mso-ascii-font-family:Cambria; mso-ascii-theme-font:minor-latin; mso-hansi-font-family:Cambria; mso-hansi-theme-font:minor-latin; mso-ansi-language:ES-TRAD; mso-fareast-language:EN-US;}

Editor’s note

Public budgets are again at center stage. The international financial crisis has left after-effects which have been magnified in those nations that have neglected their public account balance in recent years, as shown in their uncompensated budgets. Consequently, the fiscal situation of many countries, which paradoxically are the most developed countries, is becoming increasingly worrying.

Greece is a paradigmatic case. The streets of Athens, crowded with protest rallies and closed shops due to the strong recession, daily show the severity of the economic trouble. Meanwhile, the country is waiting for further assistance to honor their obligations. In view of this situation, Germany, the main economy of the Eurozone, is facing a dilemma: to let the Greek debt restructuring affect the interests of the banks that have, within their assets, bonds of the Greek debt, or to ask their contributors to keep on transferring resources to a government seized by ungovernability. The problem is certainly very difficult to solve, especially since the efforts to reduce the shortfall do not seem to be enough, and so, there are those who consider the possibility of Greece leaving the Eurozone.

Everybody is trying to avoid the Greek scenario. In Portugal, the Social Democratic Party and the Social Democratic Center signed an agreement  about the financial obligations of this country, which includes  a compromise  of not increasing the debt, while the government has decided to implement  severe  financial adjustment  measures  and structural  reforms  agreed  with the European Union and the  International  Monetary Fund. Spain, in turn, is implementing a strict fiscal adjustment program. In the United States, where the fiscal scenario is putting the debt rating at risk, the monetary authority has warned that “keeping the status quo is not an option” and that the Congress and the government must jointly develop alternatives to reduce the deficit within the framework of a long-term budgetary plan.

Undoubtedly, the issues of fiscal reforms and the budgetary balance have acquired new significance in this context of growing difficulties which many countries in the world are going through. The articles included in the present edition of the International Journal of Public Budget deal with these issues.

The Spanish government has introduced ambitious consolidation measures that should result in a considerable improvement in discretional fiscal efforts. In an important article titled Restoring Fiscal Sustainability in Spain, Pierre Beynet, Andrés Fuentes, Robert Gillingham and Robert Hagemann argue that, if budgetary results are not reached, the government should be ready to introduce further measures. Said measures might include submitting more goods and services to the standard value added tax rate. They could also be used to fund a reduction in the social security contributions paid by the employers. Once enough progress is achieved towards fiscal consolidation, a further reform of the tax system should be considered, towards taxes which are friendlier to growth. Spain also faces a dramatic increase in public spending related to the aging population, mostly due to pensions. The authors consider that further reforms will be necessary within the pension system and that the rules about budget balances for each government level will have to be revised, with the purpose of inducing the regional governments to manage larger budget surpluses, when the activity exceeds the potential.

The article titled Economic Crisis and Fiscal Reforms in Latin America, written by Mark Hallerberg and Carlos Scartascini, analyzes how the recent financial crisis has initiated pressures not only for policy reform but also fundamental institutional fiscal reforms. The paper explores the connection between economic crises and fiscal institutional reforms in a region that has experienced plenty of both in recent years, namely Latin America. For that purpose, it reviews the literature and provides five hypotheses about why, and under what circumstances, crises would promote reforms. The empirical evidence shows that debt crises make reforms more likely, but banking crises on their own, if anything, reduce the pressure for fiscal institutional reforms. Political institutions are also important. If the electoral system encourages the personal vote, the country is more likely to reform. This evidence may become useful for predicting the likelihood of reforms in the developed world.

Finally, the paper written by Richard Allen, titled The Challenge of Reforming Budgetary Institutions in Developing Countries, notes that the development of sound budgetary institutions in countries such as France, the U.K. and the U.S. has taken a very long time -200 years or more- and is still evolving. It discusses Douglass North’s prediction -which is supported by available data- that institutional reform is also likely to be very slow in developing countries since the budget is especially prone to rent-seeking influences. Finally, the paper discusses the currently fashionable emphasis on complex, multiannual PFM reform strategies, which have been strongly promoted by the donor community; and advocates a simpler approach grounded on Schick’s important principle of “getting the basics right.” The paper identifies several areas where further research would be fruitful.

This is the way in which the International Journal of Public Budget cooperates with a necessary and in-depth debate about the affairs related to budgets and the responsible, efficient financial administration of the countries’ public resources.