The Political Economy of Off-Balance Sheet Policies
 

Vanessa Endrejat

In recent years, EU governments have increasingly used a technical loophole in the calculation of government debt to stimulate public investment. This loophole allows for the implementation of debt-neutral policies and institutions, such as public policy banks or public-private infrastructure financing, commonly referred to as off-balance sheet policies. While the share of off-balance sheet policies has grown since the global financial crisis and even doubled in response to the Covid emergency, the political economy literature has paid limited attention to these issues. Instead, political economists rely on traditional indicators such as public debt levels to compare countries’ growth strategies which by design exclude off-balance sheet policies. To address this research gap, the project traces the proliferation of off-balance sheet policies since the global financial crisis and their explosion in the aftermath of the Covid pandemic. It does so by identifying and mapping the main off-balance sheet policies in Europe, including development banks, guarantee agencies, and European funds.