Economic Council calls for fiscal rules covering municipalities

The Faroese Economic Council has renewed its call for a fiscal policy framework that covers both central government and municipalities, KVF reports.

The framework should cap annual growth in public operating expenditure, regardless of how much revenue increases. Each budget proposal should also set a maximum deficit for that year, with the budget required to balance over a four- or five-year period.

The council says experience in the Faroe Islands shows that politicians find it difficult to resist increasing spending in good times. Spending tends to rise when revenues are high and fall when they are low. The Ministry of Finance says this is reflected in large deficits for both central government and municipalities during the best economic times.