EFFECTS OF THE WORLD ECONOMIC CRISIS IN THE EUROPEAN UNION - LESSONS FOR FISCAL POLICY IN THE REPUBLIKA SRPSKA

Abstract

This paper provides an overview of the current fiscal policy in the European Union and BiH, with emphasis on the causes and consequences of the crisis.Given the complexity of the task, on one hand, prompt need to overcome the problem of increase of budget deficits and the number of unemployed due to the implementation of the World economic crisis and the implementation of the SAA (Stabilisation and Association Agreement), the paper sought to suggest appropriate solutions for current situations and point out (at least briefly) the broader context of possible effects under the economic crisis and the road joining the EU. Both questions are considered from a broader regional perspective, in the context of economic and financial crisis that in October 2008 spread of Western, Central and Eastern Europe. The paper explores how the crisis has spread to financial markets of the region and how it affected the cost and sources of financing budget expenditures. The paper shows that the successive budget revision for 2009 significantly increased reliance on the market funding deficit, despite a large increase in prices of market sources of financing, that the borrowings of fiscal autonomies in the Republika Srpska and the analyzed states with the bank sector led to significantly reduced lending to the private sector and that the placement of Euro bonds in May 2009 was more expensive than the previous sales in similar conditions and comparable government bond issues in the first half of 2009. Based on the above, the paper claims that expansionary fiscal policy in the Republika Srpska would not be effective and that it would reduce the fiscal sustainability and financial stability.