Experiencias de procesos similares

Some of the rescue measures taken in the context of the financial crisis included operations that were not clearly covered by the existing accounting framework or were used in a clearly different manner. Two examples are worthwhile mentioning: (i) special liquidity schemes and (ii) special purpose entities set up in the context of the financial crisis.

Liquidity schemes

The presence of illiquid or impaired assets on banks' balance sheets created problems when banks wanted to use their assets as collateral in normal financing operations. To address this problem, authorities temporarily exchanged these illiquid assets for liquid government securities

(50_{) A contingent asset is nevertheless recorded as a financial} asset in cases where the contractual arrangement itself has a market value because it is tradable or can be offset on the market.

agreeing to swap them back when the market for these assets has recovered. (51_{) Such an operation,}

however, not only required issuing large quantities of government securities, but needed to be arranged in such a way that the large risks associated with the illiquid assets would not be transferred to the government or the central bank. Typically, in such a liquidity scheme, the government lends newly issued (but never sold on the market) government securities to the central bank with no intervening payments in return, except for some service fee. The central bank then exchanges these securities for the impaired assets held by the financial institutions and agrees with them that the reverse exchange would take place before the issued government securities mature. This way, the balance sheets of the banks are 'cleaned' of these illiquid assets, at least temporarily. To reduce the risk borne by the authorities, participating banks are requested to provide more illiquid assets in value than the value of the government securities they receive in exchange.

The statistical recording of this complex operation was not clearly defined before the Decision. In a conventional stock-lending transaction without a flow in cash the ownership of the exchanged assets is not transferred, which implies that these transactions are not recorded in the system. Transactions within a liquidity scheme can be viewed as a sequence of 'stock-lending with no cash' operations. First, the government lends its own liabilities to the central bank and then the central bank lends these government securities on to other banks without any cash payments in return. These banks also lend their illiquid assets to the central bank without receiving offsetting cash collateral. In this interpretation no transaction would have to be recorded in the system (apart from the associated fees).

Although a number of questions arise regarding the stock-lending interpretation of this operation, we will focus on one specific aspect here. Namely, should the government securities, issued for the special purpose of this scheme, be viewed as part of the outstanding stock of government gross debt?

(51_{) Such a scheme, called Special Liquidity Scheme (SLS),} was used in the UK starting as early as April 2008.

The question is relevant, since in the above interpretation the economic ownership of the government securities is not transferred, and thus it still lies with the government, in which case government debt should not be affected. This is exemplified by the fact that the so issued government securities must be returned (re- exchanged) to the central bank some time before their maturity. Consequently, no interest or principal payments are made related to these securities. (52_{) On the other hand, while being in}

the possession of the participating banks, these government liabilities can, in fact, be used as collateral or could be traded on the market. Hence, in reality they are indistinguishable from other government securities, which constitute the government debt.

There is an alternative interpretation of liquidity schemes which would result in including these government securities in general government gross debt. This involves either assuming that the government securities do not remain in the economic ownership of the government (relevant for schemes operated via central banks) or that the operation is recorded as two parallel repurchase agreements, called back-to-back repos (for schemes operated directly by the government). The Decision has resolved this issue by stating that a liquidity scheme is to be recorded as a stock- lending transaction (i.e. not affecting the consolidated gross debt) only when the exchange of assets is temporary and the risk of loss is expected to be small. In cases where the liquidity scheme is of indeterminate or not short duration (53_{) and/or the risk of loss is not expected}

to be small, the second interpretation should be used and hence government debt will be affected.

Special purpose entities

The other interesting case to be explored here in more detail is how special purpose entities (SPE), set up explicitly to address specific aspects of the

(52_{) Interest payments for the government securities used in} these schemes are typically 'rolled-up', meaning that they become due at maturity.

(53_{) The Decision considers that a scheme is of short duration if} the initial issuance of government securities takes place during the period of the financial crisis. The latter is defined as starting in summer 2007, while its end date (for statistical purposes) will be also set by Eurostat.

financial crisis, are to be recorded in government accounts, especially in the case when private sector corporations hold the majority stake.

Special purpose entities were typically used during the crisis as a substitute for a deteriorating segment of financial markets. (54_{) Given the substantial}

uncertainty regarding the asset quality of banks' balance sheets and consequently high counterparty risk in interbank markets, banks were reluctant to make business with each other. To compensate for this, special financial institutions were set up which would intermediate between banks to revive the failing market segment.

The degree of autonomy with regard to the decisions and transactions the institution carries out is decisive in recording it in either the public or private sector. For instance, a government decree obliging the unit to enter into certain transactions or the government bearing the institution's losses or the fact that its operations are covered by a government guarantee could imply that the unit's economic interest lies with the government, in which case the entity should be classified in the public sector.

(54_{) The French SFEF (Société de Financement de l'Economie} Française) could serve as an example.

However, in an attempt to treat the different public interventions with akin economic purposes similarly, namely to alleviate financial market stress, the Decision allows certain majority privately-owned entities to be recorded outside the general government sector. The conditions include that the SPE is established for a short duration, has a sole purpose to address the financial crisis and its expected losses are small in comparison with the total size of their liabilities. Nevertheless, if the body continues to acquire assets after the financial crisis then it may be reclassified in the public sector.

In accordance with the Decision, in order to improve the quality of data available regarding public interventions during the financial crisis, The European Commission (Eurostat) has started to collect information on guarantees, liquidity support measures, and special purpose entity operations in a supplementary table, which will be published alongside the EDP notifications.

The current economic crisis has called for huge fiscal efforts to avoid a deflationary spiral. This resulted in large structural deficits and growing debt ratios EU-wide, putting at risk fiscal sustainability. The resulting need for fiscal consolidation means that a well-designed fiscal policy exit strategy once the recovery is firmly underway is necessary. At the same time, to facilitate the exit and sustain budgetary consolidation, domestic fiscal frameworks need to be strengthened and adapted in the light of the lessons of the crisis. The importance of strong and resilient fiscal frameworks has been emphasised by the October 2009 Council conclusions on the fiscal exit strategy. Specifically, the Council stated that "…important flanking policies to the fiscal exit will include strengthened national budgetary frameworks for underpinning consolidation strategies and support long-term sustainability." Domestic fiscal frameworks can be defined as the set of elements of the institutional policy setting that shape fiscal policy making at the national level. They comprise the arrangements, procedures and institutions governing the planning and implementation of budgetary policies. The main components of domestic fiscal frameworks are (1) numerical fiscal rules, (2) independent fiscal institutions (i.e., specific public bodies acting in the field of budgetary policy), and (3) budgetary procedures governing the preparation, approval, and implementation of budget plans. As part of the latter category, (4) medium-term budgetary frameworks (MTBFs) for multi-annual budgetary planning are specifically considered apart because of their importance in fostering medium term horizons for fiscal policies.

This chapter analyses what elements and considerations should be taken into account more carefully in designing resilient fiscal frameworks so as to support optimal policy-making during the needed fiscal retrenchment, to avoid repeating past policy mistakes in the period of expansion, and to promote the respect of the Stability and Growth Pact provisions. It is organised as follows. First, the stylised facts on the contribution of fiscal frameworks to budgetary consolidation are reviewed (section II.3.2). In the next section, a

policy options for their strengthening are provided (section II.3.3). Next follows a discussion on how best to ensure the successful implementation of domestic fiscal framework reforms and the implications of recent institutional developments at both national and EU levels on the appropriate design of country-specific fiscal governance (section II.3.4). Thereafter, policy lessons are drawn from successful country experiences to outline an ideal fiscal framework (section II.3.5). Finally, a summary of the main arguments is provided (section II.3.6).

3.2. DID DOMESTIC FISCAL FRAMEWORKS