Fiscal Adjustment and Public Finance Management in the Euro Area

This article focuses on the effects of corrections to the budgetary policy in eurozone economies. The goal is to check whether advancement in implementing modern tools of public management is helpful in the time of fiscal adjustment. The authors assume that the most important role of a performance approach in conducting fiscal policy is the ability of government to implement an active budgetary policy meant as structural changes in the composition of public expenditures. In the case of the need to cut general levels of public spending, public sector managers should be able to conduct fiscal adjustment in such a way as to minimize negative outcomes of spending correction on society. The most important finding of the research is that performance budgeting (PB) has a very limited usefulness in a time of fiscal adjustment meant as a reduction in public spending. There is no statistical evidence that countries more advanced in the utilization of PB tools conduct more active fiscal policy; the dominating approach is cutting all expenditures by a given percentage rather than looking at priorities and social outcomes.