The study examines how confidence in the state affects the establishment and maintenance of budget equilibrium. The main supposition is that in countries where society's confidence in the political system is low there are factors contributing to budget deficit on the revenue and expenditure sides: on the revenue side, there is a greater inclination to evade tax, and on the expenditure side, a temptation to populism and difficulty in obtaining a consensus for reform. The positive link between confidence and budget equilibrium is explored first through statistical analysis of experience so far in the Euro zone, and secondly through qualitative comparison of consolidation in Sweden and in Hungary in the mid-1990s. The main conclusion drawn from recognizing the relation between confidence and equilibrium is that the chance of durable budget equilibrium is small in a low-confidence environment, where cycles of overspending and restriction can be expected instead.
Financed by the National Centre for Research and Development under grant No. SP/I/1/77065/10 by the strategic scientific research and experimental development program:
SYNAT - “Interdisciplinary System for Interactive Scientific and Scientific-Technical Information”.