Ada Cristina Marinescu (p)

European Union countries confront with high levels of public debt and bigger deficits as a result of the last economic crisis. This macroeconomic context, dominated by budget deficits and pro-cyclical policies, together with bigger tax burdens have determined EU to adopt strict fiscal rules in order to cope with these situations. The fiscal policies adopted by EU member countries must comply with the intertemporal budget constraint, that is the government can borrow only up to a certain limit, so that the current value of the debt is equal to the discounted sum of expected future surpluses. If the intertemporal budget constraint is not respected, then the fiscal policy will not be sustainable, because the rate of debt increase will surpass the rate of economic growth.
There are several EU regulations regarding the sustainability of public finances. The Stability and Growth Pact had as purpose a better fiscal coordination of EU member states, both at national and European level, containing objectives which ensure fiscal solvency on short, medium and long term. The Fiscal Compact Treaty refers also to the importance of consolidating national fiscal balances.
We are attempting to estimate the parameters of the convergence / divergence process on public debt considering two major groups of countries (EU14 - the old EU members, after Brexit, and EU11 - the eastern members who joined the EU after 2000). We identified at least two distinct regimes in the dynamics of public debt intensity: the first, for average GDP per capita below 25 thousand dollars PPC, where public debt grows relatively slowly, and the second, corresponding to values higher than 28 thousand dollars PPC, when public debt increases faster.
We also studied the relations between factors that influence public debt sustainability: GDP per capita; the coefficient of variation of per capita income series; the interest rate on government debt and the primary budget deficit (surplus).
In order to ensure fiscal sustainability, the fiscal and budgetary policies should aim to reduce budgetary deficits and increase primary surpluses, through the implementation of fiscal consolidation and structural reforms in EU member countries.

Martin Meurers (p), Johannes Moenius

We analyze productivity enhancing public expenditure in a spatial economic model with labor mobility, firm-specific increasing returns to scale, and transport costs. Building on Krugman (1991), Fujita, Krugman and Venables (1999) and Redding (2016), we compare optimal investment and tax policies of fiscally autonomous regions to those of a benevolent central planer. We find transport costs and the size of scale effects to influence optimal tax and spending rates under both regimes. For sufficiently low transport costs and low substitutability between manufacturing goods, regional fiscal autonomy leads to underinvestment: The lower the transport costs, the lower the local investment, and the higher the potential welfare gain through centralized policies. Our results challenge the view that local public goods should be financed entirely by local governments. They also offer an explanation for the recent decline of public investment at the municipal level in some fiscally decentralized industrial countries.

Elena Midler (p)

The purpose of this research is the analysis of budget spendingeffectiveness in the frame ofstate programs in terms of economic space differentiation of Russian regions.
Research objectives:
- define conceptual approaches for the evaluation ofbudget spending effectiveness in the framework of state programs in terms of regional differentiation;
- reveal the influence of regional interpretations of state programs on the effectiveness of their implementation of the ex-ante and ex post;
- to assess the resulting impact of state programs on the model object of the Southern Federal District in the context of its regions on the example of programs “promotion ofpopulation employment”.
The methodological base of the research are four basic approaches for the evaluation ofbudget spending effectiveness, used in the framework of economicsof the public sector: cost-benefit analysis (CBA), cost-utility analysis (CUA), cost-effectiveness analysis (CEA), weighted cost- effectiveness analysis (WCEA).
The givenmethods allowed to compare different programs and activities in terms of efficiency and regional differentiation, although their use is restricted to a greater extent by the planning and decision-making stage. The main differences between these methods are the peculiarities of the quantitative determination of the result and, consequently, the calculation of the very value of spendingeffectiveness.
The empirical component of the study supplements the method of evaluating spending effectivenesswhich is taken by federal legislation as the basis when the volume of spent budget is directly related to the level of resulting achievement.
The effect of the impact of “employment of population” programs on the probability of the employment of the unemployed was estimated in three Russian regions of the Southern Federal District. The information from the State Employment Service Office about the registered unemployed involvement in the “employment of population” programswas used as base for the evaluation.
Attempts have been made to estimate the total and group effects of the impact of the program on the basis of the non-experimental method of direct selection of the control groups. Two cases were analyzed: in the first case it was assumed that the effect, namely employment, was obtained under the influence of only one sub-program (a part of the state employment programs), in which the unemployed had participated, and all subsequent subprogramshad not affected that; in the second case it was assumed that the effect was a result of each program, and therefore it is necessary to consider the sequence of programs.

Ioannis Psycharis (p), Maria Zoi, Stavroula Iliopoulou , Panayotis Pantazis

In unitary states local government is highly dependent upon fiscal transfers from the centre. This paper sets out to examine the determinants for the allocation of intergovernmental grants in Greece. Using grants as dependent variable and by applying panel data regression analysis techniques it seeks to detect the determinants for the regional variations in the levels of grants allocated to Greek local government over the period 1999-2010. Results indicate that economic, social and demographic criteria along with political factors affect the level of grants to local government. Our evidence highlights also the distinctive nature of Greece in geographical terms, reporting significant differences across diverse geographical regions. Political favoritism and pork-barrel policies seem to align with the level of grants across Greek municipalities. Population characteristics and human capital stand also as significant determinants. The paper concludes with some policy issues regarding fiscal decentralization and redistribution under the recent administrative reforms in the country.