Selected Euro-Area Countries: Rules-Based Fiscal Policy and Job-Rich Growth in France, Germany, Italy and Spain

IMF Staff Country Reports, November 7, 2001

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Fiscal deficits and the public debt has grown throughout much of the postwar period in most industrialized countries under the pressure of rising public expenditure.
The trend of rising deficits and public debt "has begun to reverse after 1992."
A number of studies argue that fiscal consolidation in association with expenditure restraint, particularly reductions in primary current expenditure, "has proved more durable historically."
Fiscal consolidation essential to qualify for European Monetary Union is characterized as "a major achievement but also a difficult process" in the four countries: France, Germany, Italy, and Spain.

Role of expenditure restraint:
- Emphasis on reductions in primary current expenditure as a durable element of fiscal consolidation.
Rules-based fiscal policy:
- Fiscal consolidation linked to qualifying criteria for European Monetary Union (EMU), implying adherence to deficit and debt rules stemming from the Maastricht framework.
Labor and job-rich growth:
- Employment and wage moderation are identified as subjects linked to the fiscal and policy discussion (subjects listed include Employment, Labor, Wages).

Pursue expenditure restraint to support durable fiscal consolidation, with particular focus on primary current expenditure.
Maintain rules-based fiscal policy to meet EMU qualification requirements and sustain public debt stabilization.
Integrate fiscal consolidation efforts with labor-market and wage policies to support job-rich growth.