More in general, budgetary policy was supposed to absorb temporary cyclical differences, by allowing the automatic stabilisers to do their work. For example, during a downturn, public spending automatically goes up as more people receive unemployment benefits, while tax revenues decrease. Such “automatic” response to cyclical developments stabilises the economy.
But in most member states, the automatic stabilisers have failed to operate properly since 1999. Instead, a number of governments followed pro-cyclical budgetary policies, by loosening the budgetary reins during the economic booms, and tightening them during the busts. In other words, budgetary policies have hampered the functioning of EMU.