The role and significance of fiscal rules in the stablization of public finances

In a vast majority of countries, the fiscal crisis has ensued from the actual financial and economic crisis. Thus, the fiscal crisis has served as an incentive for the state governments to introduce normative limitations in the administration of fiscal policy. Their application is expected to prevent the procyclical fiscal policy and to provide for balancing the public expenditures. The efficiency of fiscal rules depends not only on the observance of these rules but also on the general economic situation and the institutional framework governing their application. As a new budgetary development, fiscal rules have certain advantages and disadvantages. Faced with the economic hardship, some states have suspended the application of these rules or introduced even stricter fiscal limitations. Fiscal rules are particularly significant in the European Monetary Union, where they are used as an instrument for coordinating the national fiscal policies and accomplishing a medium-term fiscal discipline. Considering that politicians are prone to avoiding accountability (as there are no sanction for the inobservance of fiscal rules), some states have introduced fiscal councils as special institutions which supplement the fiscal rules. We believe that their activities may be useful for making the government fiscal policy more transparent. Being burdened by excessive budget deficits and sovereign debts, contemporary states focus on introducing fiscal rules in an endeavour to consolidate their public expenditures. The attempts to balance the public finances prove to be a kind of reassessment of the values and efficiency of the established fiscal rules. In terms of application of these rules, experience shows that states are (on the average) involved in a more responsible administration of the fiscal policy. However, in practice, there are many infringements of fiscal rules, which ultimately shows that fiscal rules alone are insufficient to ensure the fiscal discipline.