Has Belgian Fiscal Decentralisation Reduced the Size of Government and the Budget Deficit?

Jennes, Geert

doi:10.2139/ssrn.2387374

Cited by 4 publications

(4 citation statements)

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“…Consequently, the leeway the Regions, and especially the Communities, had to adjust their revenues was limited. 10 Moreover, implicit federal bailouts were granted in 1993in , 2001in (Jennes, 2014. Amendments of the Special Finance Act in 1993 and2001 increased (unconditional) federal grants to the Communities after the French Community was repeatedly running deficits, though mostly for structural reasons.…”

Section: Belgium: a 'Most Likely Case'mentioning

confidence: 99%

“…Jennes (2014) even calls the decentralization of a share of the federal deficit an implicit bailout of the federal government.16 This was not the first time such mechanisms were used to transfer a share of the federal deficit to the constituent units. The redistribution of VAT and PIT revenues under the Special Finance Act of 1989, for example, was designed in a way that left the newly transferred responsibilities underfunded during a transition period by coupling its growth rate with inflation but not economic growth(Bethuyne, 2005;Jennes, 2014). Moreover, 3% of general government debt was transferred to the constituent units as indirect debt(Bethuyne, 2005).…”

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confidence: 99%

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Fiscal Consolidation in Federal Belgium

Schnabel¹

2019

Politics of the Low Countries

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Fiscal consolidation confronts federal states with a collective action problem, especially in federations with a tightly coupled fiscal regime such as Belgium. However, the Belgian federation has successfully solved this collective action problem even though it lacks the political institutions that the literature on dynamic federalism has identified as the main mechanisms through which federal states achieve cooperation across levels of government. This article argues that the regionalization of the party system, on the one hand, and the rationalization of the deficit problem by the High Council of Finance, on the other, are crucial to understand how Belgium was able to solve the collective action problem despite its tightly coupled fiscal regime and particularly high levels of deficits and debts. The article thus emphasizes the importance of compromise and consensus in reducing deficits and debts in federal states.

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Section: Belgium: a 'Most Likely Case'mentioning

confidence: 99%

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confidence: 99%

Fiscal Consolidation in Federal Belgium

Schnabel¹

2019

Politics of the Low Countries

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“…Brussels Region has also received additional grants from the federal government to help it to recover from consecutive budget deficits. Jennes (2014) argued that the increased use of grants by the regions, communities and local government has contributed to higher cost of government and a weakening of the overall budget. Future reform initiatives should thus consider increasing sub-national tax autonomy rather than providing more grant funding.…”

Section: Public Governance Challenges and Reform Opportunitiesmentioning

confidence: 99%

Local Government Finance

Brand¹

2016

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“…The predominance of grant-based transfers in the financing of subnational governments in Belgium, rather than a more balanced mix of expenditure and tax autonomy, affects incentives, budgetary processes, and the direction of resource distribution between the federal and subnational governments. Past studies (e.g., Jennes (2014)) have highlighted that fiscal federalism arrangements in Belgium, which rely heavily on grant transfers from the federal government and the social security system, may result in a soft-budget constraint, with scope for rapid spending increases at the regional and community levels and with fewer incentives to rationalize expenditures in the absence of binding budgetary targets. By contrast, local authorities, which have very limited own revenues, have a good track record in keeping their budgets balanced due to the requirement to adhere to a strict budgetary framework.…”

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confidence: 99%