Stress in Public Finances
The panel consisted of Agnès Bénassy-Quéré, Deputy Governor of the Banque de France; Martin Kocher, Minister of Economic Affairs; Claudia Steinwender, Austrian professor of economics at the University of Munich and Moritz Schularick, the new President of the Kiel Institute for the World Economy. The discussion was moderated by WIFO Director Gabriel Felbermayr.
The importance of international coordination in times of scarce public finances was discussed in the panel session. A broad spectrum was covered, which Governor Robert Holzmann initiated in his opening speech with his emphasis on good mutual information. The transformation places high financing requirements on the public sector, both in rich and poorer countries. However, the possibilities are limited. Many emerging countries are facing debt crises that require coordination to resolve. In Europe, debt rules are needed to coordinate fiscal policy, but these limit the scope for action. What solutions are there? A key finding was that tight budgets in particular underline the need for efficient solutions. Therefore, deepening the internal market should be a top priority in the EU; subsidy races should be avoided. However, innovative approaches will also be part of the solution, such as the IMF's "Lending into Arrears" or a modern interpretation of industrial policy in the EU.
