ABSTRACT
The Scandinavian countries clearly stand out, with significantly higher tax revenues than in the typical OECD country, thus confirming the widespread perception that Scandinavia is a region with 'big government'. The strength of the public finances in Scandinavia immediately prior to the 2008 financial crisis is striking, especially in Norway. With such initial conditions, the Scandinavian countries clearly had the capacity to use fiscal policy more actively to combat the economic downturn. This chapter explains in further detail how the fiscal frameworks have taken shape in Denmark, Norway and Sweden over the last few decades. The task of achieving medium-to-long-term fiscal sustainability is critically influenced by foreseeable demographic changes. Therefore, in addition to developing fiscal frameworks, reforms in areas directly affected by ageing, migration etc. may be crucial for sustaining the welfare state. The chapter also outlines how these challenges have been dealt with in the Scandinavian countries in recent years.
