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Is Europe saving away its future? European public funding for research in the era of fiscal consolidation

Veugelers, R. (2014) “Is Europe saving away its future? European public funding for research in the era of fiscal consolidation“, VoxEU Organisation, 28 August.

 

The Crisis affected public spending. Research and innovation is one area often highlighted as needing protection. This column does not find strong evidence that European countries sacrificed research and innovation more than other government expenditure. However, there is strong heterogeneity across countries. Innovation lagging and fiscally weak countries cut R&I spending while innovation-leading forged it ahead. Research of this divide and long-term growth is still limited.

Trends in public R&I budgets in EU countries during the crisis

The dangerous cocktail in many European countries of high debt and subdued growth calls for smart fiscal consolidation. Cost-cutting programmes should minimise the potentially negative short-term effect on economic activity, while establishing a foundation for long-term growth, with growth-enhancing public expenditure safeguarded from cuts, or even increased (Teulings 2012).

An area often highlighted as needing protection in the context of shrinking overall public budgets is Research and Innovation. To examine how public expenditure on R&I fared in Europe during the crisis (i.e. since 2007), in Veugelers (2014) we look at the GBAORD (government budget appropriations or outlays for research and development) data.1

On average, there is no strong evidence that EU countries sacrificed their R&I budgets more than other government expenditure during the crisis. However, while R&I investments were part of the stimulus packages at the onset of the crisis, more recently, R&I spending has started to trend downwards.

 

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