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Improving the quality of public finances (QPF) has become a new focus for European policy makers. This focus is largely a response to preparing the European economies for the dual
challenge of ageing populations and increased exposure to global competition. Better QPF can help tackle both challenges: either directly through fiscal consolidation, pension and expenditure reforms or indirectly by creating conditions in support of long-term growth as expenditure and revenue systems become more efficient and less distortionary. At the EU level, the Stability and Growth Pact and the Lisbon Strategy for Growth and Jobs provide, in
principle, the appropriate tools for fostering such policies, but in practice both instruments have not yet focused much on QPF which is a common component of both tools. This is partly because a broad-based conceptual framework on what makes up QPF has been missing. This paper attempts to close this gap by developing a multi-dimensional approach on QPF. The framework aims at bringing together the many different pieces of QPF that have so far mostly been studied in isolation. The paper summarises empirical findings on the links between QPF and growth, reviews how EU Member States fare in those aspects and analyses some links
between QPF and growth based on a growth-accounting approach, using discriminant analysis.
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