Fiscal stability in EU countries

Abstract

The article presents the evolution of the concept of fiscal stability towards the sustainability of public finances. The aim of the study is to join the discussion on the factors shaping fiscal stability and to verify their significance during disturbances caused by the financial and economic crisis and the impact that the COVID-19 pandemic had on the economy. The result of the undertaken research is a ranking of EU countries according to the sustainability of their public finances, created using one of the linear ordering methods, TOPSIS. In addition, the study allowed the indication of the factores determining the stability of public finances and its affecting its sustainability. The analysis was based on Eurostat data for 2010, 2015, 2017 and 2020. The study showed that the variation among the analysed countries’ sustainability of public finances decreased significantly in 2020 as compared to the previous years. Moreover, relatively significant changes in the ranking were observed in the analysed period in terms of the adopted criterion, which primarily resulted from changes in the countries’ level of economic growth and the size of their public debt in relation to GDP. In each of the studied years, Greece proved to have had the most unstable public finance. In the years 2010 and 2015, Ireland, Malta and Slovakia, respectively, occupied the first positions in the ranking, while in 2020 Romania, Lithuania, Poland and Bulgaria became the leaders.