Do Sound Fiscal Imbalances Affect Social Protection Public Spending in the EU? European Citizens versus Budget Stability.

Abstract

This paper examines the influence of fiscal imbalances on social protection levels in 28 European countries from 2008 to 2021. The objective is to affirm fiscal policy's cyclical or countercyclical nature and its impact on these social indicators. The novelty of this study lies in placing the European citizen at the forefront of the analysis, considering the repercussions that fiscal policies implemented by various governments have on social living conditions. Robust evidence suggests that an increase in lagged public revenues correlates with expanding social coverage, while a double-lagged public expenditure and a nation's indebtedness contribute adversely. Finally, it is confirmed that social protection expenditure exhibits more pronounced fluctuations in countries adhering to stringent fiscal rules.