Politics of the Low Countries

Article

Fiscal Consolidation in Federal Belgium

Collective Action Problem and Solutions

Keywords fiscal consolidation, fiscal policy, federalism, intergovernmental relations, High Council of Finance
Authors Johanna Schnabel
Author's information

347711 Johanna Schnabel
School of Politics and International Relations, University of Kent, Rutherford College, Canterbury CT2 7NX, United Kingdom.
  • Abstract

      Fiscal consolidation confronts federal states with a collective action problem, especially in federations with a tightly coupled fiscal regime such as Belgium. However, the Belgian federation has successfully solved this collective action problem even though it lacks the political institutions that the literature on dynamic federalism has identified as the main mechanisms through which federal states achieve cooperation across levels of government. This article argues that the regionalization of the party system, on the one hand, and the rationalization of the deficit problem by the High Council of Finance, on the other, are crucial to understand how Belgium was able to solve the collective action problem despite its tightly coupled fiscal regime and particularly high levels of deficits and debts. The article thus emphasizes the importance of compromise and consensus in reducing deficits and debts in federal states.

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