No. 71, 2016 - Structural changes in public expenditures in the European Union since 2008 – with special regard to New Member States

This paper analyses the reasons for growing size and the change in the structure of public expenditures in the European Union since 2007, with special regard to the New Member States (NMS). In the first part, by using the decomposition technic, the increase of expenditure ratio-to-GDP will be separated to 1) the impact of the change in GDP and 2) the effect of the change of actual public expenditures. The calculation shows that in 2009, mainly the fall of GDP was responsible for the rise in the expenditure ratio. This means that the „automatic stabilizer” was more important in shaping the fiscal trends in the year of the acute crisis than the demand-boosting actions. Taken, however, the entire period since 2008, the higher expenditure ratio in 2014 can exclusively explained by the expenditure effect. Beyond the average, there is a great variety both in the old and in the new member states.
Concerning the structure of raising expenditure ratio, the paper uses the COFOG statistics measured by the share in GDP. The main characteristic of the changes can be summarized by the growing share of expenditures on social protection and health since 2008, in the EU28 average. In NMS, however, the share of expenditures on social protection decreased since the global crisis.
This paper was prepared in the FP7 Seventh Framework Programme of the European Union, SPINTAN project WP5 Austerity and recovery,  Grant agreement number: 612774.

The paper is available here.