As the rest of the world, Europe was hit by the economic crisis. Budget deficits ballooned as tax revenue decreased, and governments tried to save their economies with stimulus packages. The budget deficit problem (governments spending more money than what they get in revenue) is specially acute in countries like Greece, Spain, Ireland and the United Kingdom. In those nations, the budget deficit is over (or very close to) 10% of the size of their economies (measured by GDP).
A large budget deficit means that the government needs to borrow the extra money, raise taxes, cut spending, or a mixture of the three.
I made the following chart using Economist Intelligence Unit estimates for budget deficit in 2010 across 19 European nations. I then gathered information on the political ideology of the ruling political parties in those countries, dividing them into the categories of left, center, or right. Notice that these categories are not universal, but country-specific, so that a government in the "left" category is said to fall on the left of the political spectrum within its nation, and not within Europe as a whole. Therefore, for example, the British government is considered left wing, even if in other nations it would not be classified as such. If the government is a coalition of right and left wing parties, I decided it should fall on the center.
The graph shows the average budget deficit of all the countries in each of the three categories (with governments on the left, center, and the right of the political spectrum)
It seems that in Europe, even with the crisis, right-wing governments are still much more committed to fiscal responsibility than those on the center and certainly than those on the left. It seems that incumbent leftist parties in Europe will be under greater pressure to create new taxes and raise old ones, put on more debt, and cut expenditures aggressively. These measures, as the case of Greece shows, will be very unpopular. Perhaps Europeans will finally learn that out of control entitlements and public spending are usually a recipe for disaster.
The following is the data I used for the chart:
2 comentarios on "Europe: How the Left has no notion of fiscal responsibility"
I think the case of greece is quite particular. The real data never appeared until the leftist government, elected last year, showed the real depth of the crisis generated by the old right government.
In a similar way, the fiscal policy which is effective nowadays in Germany was generated while the left government was in the power (in fact, the Harz IV which made Germany competitive again was what cause the fall out of the left government). However, now the right wing coalition (at least the junior partners of the new government) want to increase the debt by reducing taxes while keeping a lot of expenditure.
All in all, I think this "apriori" analysis requires something more. You cannot just label the government as left or right without consider the recent changes in government. In some cases, like in Spain, despite having a leftist government, the country continue fighting with the cultural baggage left by Franco more than forty years ago.
I knew that some readers would disagree with the classification I present here. Mr. Rojas' arguments is valid to the extent that sometimes governments inherit negative or positive balances in their accounts from previous administrations, which is why the graph could be taken with some skepticism.
Nonetheless, Mr. Rojas' argument that Spain's current fiscal deficit is somehow affected by the "cultural baggage" of Franquismo, 35 years after Franco's death is farfetched, to say the least. I believe most people would agree that Spain's 2010 fiscal deficit has more to do with the government that has managed expenditure for the last six years than with the old dictator.
For Germany, the case is the same. Perhaps past left-wing German governments were thrifty, and I tend to think that generally the Germans are usually very responsible with their fiscal accounts. However, you cannot take the 5 years of Merkel's government entirely out of the picture and say that she is fiscally responsible today simply because she inherited that policy approach from another government half a decade ago.
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