![]() ![]() Instead of allocation ever more resources to the state, governments should focus on reforming public governance and enhancing the efficiency of administration through digitization. 3 At this stage, imposing new tasks on the state would likely be counterproductive and wasteful. Because of its oversize, the state apparatus is self-absorbed instead of pursuing the tasks entrusted to it: providing public infrastructure in an efficient way and setting a regulatory framework for the operation of market forces. The declining efficiency of the public administration is a reflection of technological backwardness coupled with the overburdening of the administration with many duties and responsibilities. In Spain and Germany, the increase in social spending was less pronounced, but the upward trend is visible in the more recent years. A similar trend can also be observed in Italy: The share of social benefits increased from 34% in 2000 to 40% in 2022, while the share of investment decreased from 6% to 4.8% over the same period. 1 The largest reallocation of public funds in recent decades has taken place in France, where the share of public spending on social benefits increased from 28% in 1959 to 34% in 2020. However, this upward trend in social spending is also due to increasing pressure from certain interest groups, which has led governments to take on stronger redistributive tasks and reduce public spending, especially on investment ( Fig. ![]() The second significant increase was triggered by the coincidence of recent crisis events since late 2019, namely the covid-pandemic and the Russian invasion of Ukraine.Īnother important explanation stems from the structural developments of an ageing population and the associated sharp increase in spending on social security systems. The first significant increase in the share of expenditure took place immediately after the great financial crisis of 2008. One of the most important explanations can be found in the intense frequency and severity of crises in recent decades. Multiple factors are likely responsible for the growing size of the public sector. The most modest increase in the government share occurred in Germany, from 47% in 2000 to 51% in 2021. In France, the increase was less pronounced (from 50% in 2000 to 58% in 2021), but the relative size of government in France tends to be among the highest in the developed world. A similar trend was observed in Italy, with the corresponding share rising from 45% at the beginning of the millennium to 55% in 2021. The largest surge in total government expenditure as a percentage share of nominal GDP was in Spain, from 37% in 2000 to over 51% in 2020, due to a sharp rise in pandemic-related spending. Public expenditures in the four large euro area member states, Germany, France, Italy and Spain, increased significantly over the past decades ( Fig. Looking at the main euro area members, this note shows that the high expectations for the role of the state in solving the pressing problems may be frustrated by declining productivity of public spending and decreasing effectiveness of government. Governments are increasingly assigned new tasks in achieving various economic policy objectives. ![]()
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