Comments on expenditure growth in line with potential GDP growth and the 'Golden Rule': An assessment of the propositions of ECOFIN and a 'Golden Rule' for public investment including educational spending. Supplement to the expertise 'Stability by balanced growth' for the Group of the Progressive Alliance of Socialists Democrats in the European Parliament by Torsten Niechoj

摘要

This comment for the European Parliament supplements the expertise by Niechoj (2011) on different proposals for the reform of the European Stability and Growth Pact. The comment focuses on two points: (1) Whether the proposition of the Economic and Financial Affairs Council (ECOFIN) is reasonable. This proposal aims at a modification of the former proposals in a way that - after having reached medium-term balanced budget objectives - governmental spending should grow only in line with potential GDP instead of actual GDP. It decreases pro-cyclicality and, therefore, should be implemented. (2) How a "Golden Rule" for public investment could be included into the pact. Against the background of sufficient available data, public net investment and net educational and research expenditures should be excluded from the regulation of the Stability and Growth Pact to increase long-run growth perspectives.