Institute of Economic Research Working Papers No. 135/2015
The global financial crisis has led to a significant deterioration of the fiscal position of the euro area countries. Measures taken by member states after euro zone crisis led to a considerable worsening in the budget balance and growth of the public debt. Fiscal consolidations resulted in a deepening recession and farther fall of budget revenues, causing additional need for austerity programs, which contributed and contributes to delay in the exit of these countries from the crisis. However, the action taken by the European Central Bank has become the key point for rescuing situation of the most indebted countries. Increase of the European financial system's liquidity by the ECB, when the euro zone sovereign debt crisis transformed additionally into a liquidity crisis, resulted in a reduction in debt servicing costs and de facto saved some member states from insolvency and the whole eurozone from collapse. The aim of the publication is to examine the fiscal position of the euro area countries and fiscal policy architecture in Europe after the outbreak of the financial and economic crisis stared in 2008. The first part of the publication consists of the analyses of the budgetary situation of euro area countries and complications with the increasing costs of servicing the public debt in the European market affected by the financial liquidity crisis. In the second section the most important changes in the framework of budgetary policies coordination process in the euro zone are presented. The final section describes the role and activities of the European Central Bank in minimising the negative consequences of the debt crisis in the euro zone.
sovereign debt crisis of the euro area EMU monetary policy the European Semester Fiscal Pact the European Stability Mechanism