Fiscal data revisions in Europe and the credibility of fiscal policies

by Francisco de Castro, Javier J. Pérez and Marta Rodríguez

Vox
November 12, 2011

The recent huge revisions witnessed in Greek data have raised concerns also about the credibility of the EU’s fiscal data reporting system. This column argues that initially published fiscal-deficit figures tend to be to revised towards an increased deficit at subsequent publication dates, and that the proximity of elections and the business cycle explain data revisions. It says that the EU should strengthen the role of Eurostat, the EU’s statistical agency, in auditing individual countries’ fiscal accounts and encourage EU countries to adopt more stringent fiscal rules.

In a recent VoxEU column, Beetsma et al (2011) highlight “Europe’s fiscal policy credibility problem”. They show how fiscal plans get steadily worse as governments move from planning to implementation, even in the case of estimated outcomes published towards the end of the year being forecast. They stress how this behaviour harms the credibility of fiscal policies in Europe and how appropriate fiscal institutions could play a substantial role in correcting these problems, especially if EU countries were to take more ownership of EU fiscal rules.

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