Fiscal Policy Sustainability of the EU Countries: Evidence from Nonstationary Panel Data

In the recent years, fiscal sustainability has gained importance especially in the EU countries. Determining the fiscal sustainability within the fragile structure of the European Union (EU) countries plays a major role in ensuring fiscal balances. Sustainability of the fiscal policy in the EU countries in the period of 2000: 1-2011: 4 is examined through the analysis of public revenues and public expenditures with non-stationary panel data methods in this article. The results show that sustainability of fiscal policies for the EU-12, EU-15, EU-25 and EU-27 country groups was not maintained and the governments' behaviours were inconsistent with their inter-temporal budget constraints. These results show that fiscal policies for the EU countries are not sustainable.