Effects of the Current Economic Crisis on the Fiscal Variables in EU Countries.docVIP

Theoretical and Applied Economics Volume XVIII (2011), No. 2(555), pp. 127-138 Effects of the Current Economic Crisis on the Fiscal Variables in EU Countries* Iulian Viorel BRA?OVEANU Bucharest Academy of Economic Studies iulian.brasoveanu@fin.ase.ro Laura Obreja BRA?OVEANU Bucharest Academy of Economic Studies laura_obreja@ Abstract. Our paper aims to capture the effects of the current economic and financial crisis on fiscal variables, the 27 EU Member States, based on macroeconomic developments until 2010 and projected for 2011. Starting from the economic recession, from the increase of unemployment and the relative stability of prices in the EU overall (macroeconomic developments that characterize the current crisis), we analyze the effects of those developments on the public revenues and expenditures, on the conventional deficit and public debt, which are macroeconomic variables that comprise the pentagon of economic macro stabilization. Keywords: economic recession; unemployment; inflation; budgetary deficit; public debt. JEL Code: E6. REL Codes: 8B, 8E, 8F, 8G, 8K. * Ideas in this article were presented at the Symposium ?The global crisis and reconstruction of economics?”, 5-6 November 2010, Faculty of Economics, Bucharest Academy of Economic Studies.  128 Iulian Viorel Bra?oveanu, Laura Obreja Bra?oveanu 1. Introduction The current crisis might be described as an initial period of economic downturn which generated pressure on unemployment rate. The most sensitive fiscal variable to these macroeconomic dezequilibrium is the consolidated total public revenue, which suffered a strong setback. Consolidated total public expenditure could not be adjusted according to these decreases in revenue. The result was the increase in consolidated national government budget deficits, which in turn resulted in significant increases in public de