- 2073-7009 (online)
Sub-national Finances and Fiscal Consolidation
Walking on Thin Ice
- Camila Vammalle1, Claudia Hulbert
- Author Affiliations
- 1: OECD, France
- 11 Mar 2013
- Bibliographic information
In parallel, borrowing conditions deteriorated for many sub-national governments, as banks and financial markets became increasingly reluctant to lend. Since late 2008, financial markets started discriminating between high- and low-quality SNG bonds, and yields reached record-high levels for sub-national governments perceived as less creditworthy.
Facing degraded finances, upward pressure on expenditures and deteriorated borrowing conditions, many sub-national governments have used public investment as an adjustment variable to reduce their budget deficits and preserve their spending on welfare, health or education. However, such policies may hinder long-term growth perspectives.
- bailouts, public debt, fiscal stress, sub-national government
- JEL Classification:
- H12: Public Economics / Structure and Scope of Government / Crisis Management
- H70: Public Economics / State and Local Government; Intergovernmental Relations / General
- H74: Public Economics / State and Local Government; Intergovernmental Relations / State and Local Borrowing
- H81: Public Economics / Miscellaneous Issues / Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts