The growing awareness of the need for sustainable development at the
United Nations level, has highlighted the complexity of system dynamics and the
challenges for governments and policymakers. New objectives, based on increasing
dimensions considered relevant to sustainability, are incorporated in the agenda of
policy designers: in this scenario, the traditional economic goals of long-term
prosperity become more difficult to achieve.
Moreover, although governments in Europe, the United States, and many other market
economy countries are committed to balancing the public budget, de facto, public
deficits are realized every year and public debt accumulates. Specifically in the EU,
due to the pandemic crisis, the previously agreed limits of the public deficit in relation
to the level of economic activity are currently not respected. The data and statistical
trends are evident.
In the current organization of the globalized economy, multinational groups do not help
the public authorities in governing the economy, playing as autonomous economic
entities. The introduction of technological innovations and the re-location of plants to
deal with regional demand crises, falling prices, and global market competition worsen
the tasks of economic and social stabilization. Shareholders demand profitability and,
consequently, private financial statements must be annually positive.
This is a budget 'trap': policymakers struggle with income redistribution to address the
current economic crisis. This dilemma is discussed with examples from OECD
countries.
Keywords: Fiscal policy, Financial sustainability, Government spending, Public sector accounting, Public budget, Public deficit, Public debt.
