Seeking a sustainable size and structure for the Greek public sector’s activities according to the fiscal pact for Euro

Abstract

A number of institutional and non-institutional factors, not only economically rational but also political and historical, have risen in the long after war debate about the public sector’s expansion, size and structure. Obvious inefficiencies, mounting resistance to further increases of tax burden, and concerns about long term sustainability of public finances, have stirred demands to reduce the size of public sector and reconsider the structure of expenditures and taxes. These factors are of crucial importance, for the required fiscal discipline in Euro –Zone and particularly under the new fiscal pact for Europe. In the case of Greek public sector, irresponsible fiscal policies, caused by political and institutional factors, seem to be the main reason of today’s most severe after war fiscal and economic crisis. The same factors, have also affected decisively the size and structure of Greek Public sector’s activities. By this paper on the contrary, we try to explore the determinants for a sustainable size and structure for the Greek Public Sector, according to the framework posed by the second bailout package, and the aforementioned fiscal pact.

JEL Classification: H11, H20, H30, H5, H62.

Keywords: Measuring Public Sector size, Public Sector structure, Fiscal consolidation, Fiscal sustainability, Fiscal Pact.