Public finances and Public Private Partnerships in the European Union

We analyse the Public Private Partnerships (PPPs) in order to account for their uneven distribution among the European Union countries and to identify the motivations of the public actor in selecting PPPs. We focus on the fiscal incentives to overcome budget and borrowing constraints, taking into account the political features and institutional frameworks of the countries. Using IMF data over the years 1990-2015, we confirm that the state of public finances impacts on the government’s choice of PPPs: more financially constrained governments find the PPP option attractive, while high-debt countries reduce the private investors’ interest in PPP. Fiscal rules increased the PPP bias in the pre-crisis period due to the possibility of off-balance accounting, while the post-crisis reform of the Stability and Growth Pact and the increased supranational and domestic surveillance seem to better discipline PPP employment. PPPs are, also, confirmed to be under the influence of political competition and government’s preferences for current expenditures.