 Public Debt in a Federal State: Warnings from BelgiumDieter Van Esbroeck and Erik Buyst No 743621, Working Papers of VIVES - Research Centre for Regional Economics from KU Leuven, Faculty of Economics and Business (FEB), VIVES - Research Centre for Regional Economics Abstract: This paper examines the dynamics of public debt in a fiscal federation, with a particular focus on Belgium from 1970 onwards. Lately, the institutions responsible for monitoring Belgium’s fiscal situation have been issuing increasingly alarming alerts regarding the sustainability of the current budget deficits. We show that Belgium has experienced a continuous cycle of high public debt and claim that the explanation for this phenomenon lies in the interplay between the different political or geographical entities in the feder ation. We examine whether the different entities exhibit free-riding behaviour in public debt creation and find significant fiscal imbalances both at the federal level and at the sub-national level. Multiple political and constitutional mechanisms are suggested as potential drivers. Furthermore, the paper presents and discusses several policy options for breaking the cycle of high public debt: devising a new state reform, implementing a no-bailout clause and establishing an insolvency framework. Pages: 39 Published in VIVES Discussion Paper 98 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ete:vivwps:743621 Access Statistics for this paper More papers in Working Papers of VIVES - Research Centre for Regional Economics from KU Leuven, Faculty of Economics and Business (FEB), VIVES - Research Centre for Regional Economics |
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