Programmes. In the same vein, the ECOFIN report to the March 2005 European Council on "Improving
the implementation of the Stability and Growth Pact (SGP)" includes specific references to the overall
quality of public finances and the implementation of policies in the context of the Lisbon Strategy for
Growth and Jobs as elements to be taken into account when assessing budgetary developments.
Therefore, in January 2006 the ECOFIN Council invited the Economic Policy Committee (EPC) and the
Commission to analyse the following aspects linked to the quality of public finances:
- The Council invited the Commission in joint co-operation with the EPC to conduct a
comprehensive analysis of the existing national fiscal rules and institutions in the EU.^2 - The Council invited Eurostat and the National Statistical Offices, in co-operation with the EPC, to
step up efforts on data availability to better monitor the composition of public expenditures. - Finally, the Council invited the EPC to further develop the measurement of public expenditure
efficiency, by improving the information content of budgets and the exchange of best practices in
the evaluation of public spending
This report summarises the progress achieved so far in relation to these Council requests and suggests a
possible way forward.
2. Improving public expenditure efficiency
In response to the January 2006 Council request, the Commission submitted a background paper^3 to the
informal ECOFIN in April 2007 on the efficiency and effectiveness of public spending. A joint
Commission/ EPC Issues paper served as a basis for Ministers' discussion. The main messages could be
summarized as follow:
- Public spending represents a large share of GDP and therefore has a major impact on the
productivity of the whole economy. Improved efficiency and effectiveness of public spending
could alleviate budget constraints as it allows achieving the same results at lower levels of
spending or increases value for money by achieving better outcomes at the same level of spending.
Even though EU Member States' budgets show large country differences in both the level and the
composition of public expenditures, cross-country comparisons can provide important insights into
the policy challenges that countries face.
allocation of resources Member States should, without prejudice to guidelines on economic stability and sustainability,
re-direct the composition of public expenditure towards growth-enhancing categories in line with the Lisbon strategy,
adapt tax structures to strengthen growth potential, ensure that mechanisms are in place to assess the relationship
between public spending and the achievement of policy objectives and ensure the overall coherence of reform packages.(^2) This request is line with the statements included in the report on the SGP reform endorsed by the European Council in
March 2005, which says that national budgetary rules should be complementary to the Member States’ commitments
under the Stability and Growth Pact. It also says that national institutions could play a more prominent role in budgetary
surveillance to strengthen national ownership, enhance enforcement through national public opinion and complement the
economic and policy analysis at EU level.
(^3) Developed further in Mandl, U. A. Dierx and F. Ilzkovitz (2008), "The efficiency and effectivness of public spending,"
European Economy. Economic Paper No. 301 (Brussels).