An Evaluation of the Sale of Public Assets as Alternative Public Debt Reduction Strategy in European Countries

Author:Irina Bilan
Performance and Risks in the European Economy
An Evaluation of the Sale of Public Assets as Alternative Public Debt
Reduction Strategy in European Countries
Irina Bilan1
Abstract: Against th e backdrop of the recent crisis, many European countries have been confronted to high
and unsustainable public debts, the issue of conceiving and implementing debt reduction strategies becoming
one of great interest to both the scientific community and public policy-makers. Several options have been
put forward, some of th em (like fiscal consolidation) explored in depth by researchers and already applied in
many countries, while others have benefited of less, even minor attention. Thus, our paper aims to evaluate
the sale of public (financial and non-financial) assets as possible alternative for restoring public debt
sustainability in European countries, contributes to existing literature by providing a more thorough analysis
of a usually overlooked alternative. The paper is d esigned as a case study, mixing qualitative and quantitative
evidence on the topics of interest with regard to the situation of 20 European countries, selected on criteria of
data availability. The general con clusion is that the sale of public assets should, at least in the most indebted
countries, be incorporated into public debt reduction strategies, but in addition to other measures (mainly
fiscal consolidation ones) and always on the basis of realistic and extensive cost-benefit analysis.
Keywords: financial assets; non-financial assets; economic crisis; government debt; public policy
JEL Classification: G01; H27; H63; H82
1 Introduction
Not long after the outbreak of the global economic and financial crisis, in late 2009, it became obvious
for some European countries that the worst was yet to come, as a new, sovereign debt crisis, was
emerging. As a result of the economic recession, but also of the financial support measures aimed at
helping banks and other financial institutions in trouble, public debt severely increased in many
countries, becoming unsustainable. In just two years, by 2011, the general government gross debt
overpassed 100% of GDP in Belgium, Greece, Ireland, Italy and Portugal, but increased substantially
in many other European countries. This was adding to preexisting fiscal vulnerabilities, like the large
amount of implicit liabilities resulting from unsustainable public pension schemes (Nuta, 2014). As
public authorities realized that the issue of high and increasing public debt should be immediately
addressed, it became imperative to conceive and implement public debt reduction strategies aimed at
restoring debt sustainability. Several policy approaches were considered, namely fiscal consolidation
1 Senior Lecturer, PhD, "Al. I. Cuza" University of Iasi, Facult y of Economics and Business Administration Finance, Money
and Public Administration Department, Romania, Address: 22, Carol I Bvd., 700505, Iasi, Romania, Tel.: +40 232 201440,
Corresponding author:

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