The Gains From Early Intervention In Europe: Fiscal Surveillance And Fiscal Planning Using Cash Data
This paper does two things. First it examines the use of real time inter-annual cash data and the role of early interventions for improving the monitoring of national fiscal policies and the correction of fiscal indiscipline. Early warnings are important because they allow them to spread the necessary adjustments over time. Examples from Germany and Italy show that large corrections are often necessary early on to make adjustments later on acceptable and to keep debt ratios from escalating. Second, without early interventions, the later deficit reductions typically double in size - meaning governments become subject to the excessive deficit procedure and significant improvement tests more often.