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SUMMARY:A Surplus of Ambition: Can Europe Solve its Debt Problems by Runni
 ng Primary Surpluses? - Professor Barry Eichengreen\, University of Califo
 rnia\, Berkeley
DTSTART:20150218T180000Z
DTEND:20150218T193000Z
UID:TALK57084@talks.cam.ac.uk
CONTACT:Philippa Millerchip
DESCRIPTION:IMF forecasts and the EU's Fiscal Compact foresee Europe's hea
 vily indebted countries running primary budget surpluses of as much as 5 p
 ercent of GDP for as long as 10 years in order to maintain debt sustainabi
 lity and bring their debt/GDP ratios down to the Compact's 60 percent targ
 et. We show that primary surpluses this large and persistent are rare. In 
 an extensive sample of high- and middle-income countries there are just 3 
 (nonoverlapping) episodes where countries ran primary surpluses of at leas
 t 5 per cent of GDP for 10 years. Analyzing a less restrictive definition 
 of persistent surplus episodes (primary surpluses averaging at least 3 per
 cent of GDP for 5 years)\, we find that surplus episodes are more likely w
 hen growth is strong\, when the current account of the balance of payments
  is in surplus (savings rates are high)\, when the debt-to-GDP ratio is hi
 gh (heightening the urgency of fiscal adjustment)\, and when the governing
  party controls all houses of parliament or congress (its bargaining posit
 ion is strong). Left wing governments\, strikingly\, are more likely to ru
 n large\, persistent primary surpluses. In advanced countries\, proportion
 al representation electoral systems that give rise to encompassing coaliti
 ons are associated with surplus episodes. The point estimates do not provi
 de much encouragement for the view that a country like Italy will be able 
 to run a primary budget surplus as large and persistent as officially proj
 ected.
LOCATION:The Ramsden Room\, St Catharine's College
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