Economic policy Report

Are the spending priorities of euro-area countries converging?

A report by the Jacques Delors Institut Berlin

Photo: Christine und Hagen Graf

On 30 June 2017, the Jacques Delors Institut Berlin published a report on the spending priorities of the European countries. Robin Huguenot-Noël, contributor of the Thinking Lab on Sustainable Growth, tried to identify common points in government spending strategies on a national scale, together with Jörg Haas. They came out with four main findings, which reveal that convergence is far from being achieved.

Government expenditure accounts for 30 to 60% of GDP in the euro area. Which countries spend the most? To what extent do countries differ in their spending priorities? Has there been any convergence since the inception of the EU’s monetary union?

In this Policy Paper, Robin Huguenot-Noël, Policy Analyst at the EPC and Associate Fellow of the Jacques Delors Institut Berlin, and Jörg Haas, Research Fellow at the Jacques Delors Institute in Berlin, analyze data on general government spending in the euro area and present it in seven charts. Their findings can be summarized as follows:

  • Public spending ratios in the euro area vary widely and have shown no sign of lasting convergence since the inception of the Economic and Monetary Union. Belgium, Finland, and France are countries with especially large public sectors, while the opposite applies to Ireland and the Baltics.
  • The differences are especially pronounced when it comes to social protection. Large economies like France, Italy, and Spain have seen relative spending levels increase in the last fifteen years, while they have fallen in Germany.
  • When it comes to potentially growth-enhancing expenditure on education, public investment, and R&D, no uniform trend is discernible. However, several countries that were hit hard by the European debt crisis have decreased their productive spending.
  • Generally, spending levels and priorities seem to reflect first and foremost domestic preferences and path dependency.

According to the authors, the lack of convergence in the spending priorities should not necessarily be considered as a threat for European integration. It is a legitimate expression of national values and interests, which could to some extent foster economic resilience. And yet this diversity explains why European institutions have such a hard time finding policies that suit all the member states equally well.

The full report is available here on the Jacques Delors Institut Berlin’s website, where this article was originally published.

Robin Huguenot-Noël is working as policy adviser for the European Policy Center (EPC) specialised in economic development policies, and associate fellow of the Jacques Delors Institut Berlin. He is a contributor of the Thinking Lab on Sustainable Growth, which is part of the ‘Dialogue on Europe’ project.