Shaping the Fiscal Policy Framework: Lessons from Fiscal Consolidations in Denmark and Sweden

This chapter provides an overview of experiences with fiscal and structural reforms in Denmark and Sweden. The focus is on the experiences with large-scale fiscal consolidations in Denmark, the record of national fiscal rules with fiscal councils and gradual improvement of public finances in Sweden, and the experiences with occupational pension schemes in Denmark. It is found that (a) longer-term debt sustainability requires symmetry in counter-cyclical fiscal policies, with public saving during upturns that creates room for manoeuvre for a more active policy during bad times; (b) fiscal and structural reforms are easier to move forward when the economy is under severe pressure; and (c) there is no easy way to copy successful fiscal frameworks, as the effects of and political support for budget consolidations typically differ across countries.