Fiscal adjustment – strategies and consequences: empirical evidence for European Union economies

The current economic context brings new challenges for all countries in order to take action for fiscal adjustment, as a reaction for decreasing of public revenues, through lowering the tax base and the capacity to collect taxes, and for the inability to adjust the public expenditures. Fiscal adjustment could be done through increasing public revenues, decreasing public expenditures or applying a mixed strategy. The effectiveness and the consequences of a fiscal adjustment depends on the adopted strategy, but also on the size and the composition of the fiscal adjustment. In this paper we identify the fiscal adjustment strategies applied in European Union countries and we examine the evidence on fiscal adjustments in order to determine the relevant factors for the success and expansionary effects.