Les déficits publics en Europe : causes, conséquences ou remèdes à la crise ?

Abstract

Public deficits in Europe : causes, consequences, or remedies to the crisis ? Jerome Creel Henri Sterdyniak European countries have recently undergone the conjunction of high interest rates in relation to growth rates and substantial public deficits, which has made the burden of public debt go adrift. This paper aims at describing and explaining this evolution. In the first part, we construct and discuss some indicators of fiscal stance ; we show that, in the recent years, fiscal policy has hardly been expansionary ; the growth in debt can therefore be explained by the high level of real interest rates and the needs for economic stabilization. The discussion over the notion of sustainability of fiscal policies sheds light on its ambiguities and the risks we think are linked to its use. A more relevant distinction is between adjustment deficits, necessary to regulate the economy, and autonomous deficits, which are harmful for capital accumulation. The paper then presents the two opposed theories : according to the neoclassical view, public deficits themselves are responsible for the level of interest rates. Hence, their reduction should decrease interest rates with almost no cost in terms of activity level. These reductions would then boost capital accumulation and growth. According to the keynesian view, however, public deficits are necessary to support demand when interest rates grow because of disinflation policies and financial deregulation. In this context, a number of models can explain the coexistence of high public deficits and real interest rates : Central Banks' independence, non cooperative economic policies with flexible exchange rates, constraints over « domi- nated countries » within a system of fixed exchange rates, the modifica- tion in the functioning of the financial spheres of activity. At last, a model with wealth behaviors discuss the consequences of a growth in interest rates over households and firms. It then analyses the optimal economic policy : the growth in public debt appears necessary to support both demand and capital accumulation. We can globally discard the classical view according to which growth in public debts and deficits would be primarily responsible for high real interest rates and unemployment. This analysis is not sensible in the low- demand context Europe has undergone since 1981. The increase in public deficits has appeared necessary to sustain economic growth and capital accumulation, as States had lost control over interest rates. Recovering their control is therefore a crucial stake in order to decrease real interest rates, boost growth, and then reduce public debts. The criteria on public finance in the Maastricht Treaty are not up the problem.