State Expenditure and Economic Growth in Europe. The Contribution of Public Expenditures to the Lisbon Strategy

The EU's Lisbon strategy accords considerable importance to the quality and sustainability of public finances in achieving its growth targets. This study illustrates the growth-oriented potential for reforming the structure of state expenditures and the institutions charged with monitoring such expenditures. Based on the directions found in the EU's integrated guidelines and the national reform programmes of the EU member countries, the study develops options for budget policy to contribute to the implementation of the Lisbon goals through adjusting the level and structure of the state expenditures. The study found that Austria is, generally, on course with regard to the Lisbon goals: its fiscal stability, a key framework condition, appears to be ensured, and the expenditure ratio has been markedly reduced in response to the stability requirements by the economic and monetary union as well as the Lisbon strategy. Furthermore, the envisaged reform of the budget law is set to be a key step that will further strengthen monitoring of expenditures. Nevertheless, the structure of Austrian state expenditures fails to fully support the Lisbon goals: while research spending is growing, the social sector and subsidies are reporting above-average expenditures. The growth potential could thus be further improved by continuing the shifts towards state expenditures that will promote growth and by optimising overall framework conditions.