Fiscal Contractions in Eurozone in the Years 1995-2013: Can Non-Keynesian Effects Be Helpful in Future Deleverage Process?

Last global financial crisis has led to massive fiscal stimulation actions in EU which resulted in significant increase of public debt. As a result, in near future EU countries will have to adopt much stricter long term fiscal policy that will be necessary for deleveraging process. In this context the aim of the research is to check whether one can find non-Keynesian effects of fiscal consolidations in Eurozone countries in last decade. If the answer is positive, then could these non-Keynesian effects be significant developing factor. The third scientific question concentrates on the ways the fiscal consolidations were implemented and the potential influence of consolidations strategies on short term growth. The research is based on European Commission and Eurostat fiscal and macroeconomic data for the years 1995-2013. The econometric dynamic panel model based on the concept of conditional convergence was applied. As a complementary method qualitative analysis of cases of significant contractions was used with the concentration on the differences between expansionary and conventional Keynesian cases of fiscal contractions. The research gives some arguments for existence of fiscal transitions channels leading to non-Keynesian effects of fiscal policy, which in the same time can be a factor of conditional convergence.