The forgotten side of the government balance sheet - assets

In the on going sovereign debt crisis, much has been written about the liability side of the government balance sheet and the ballooning debt burden. Much less attention has been paid to the other side of the balance sheet - the assets. These assets are, however, far from negligible: financial assets alone account for 26% of euro area GDP, or €2.35 trillion. We also find that European governments raise between 5% and 15% of their revenues from their assets.

How to sweat these assets?

The Pavlovian reaction of politicians (and economists) is to sell these assets to generate receipts for the government. We show, however, that this does not always make sense, whether from an accounting point of view, or an economic and political point of view. Rather, we investigate other ways of making government assets more productive. We look at three different techniques in particular: securitisation; leaseback and other forms of dynamic management of real estate; and the rationalisation of shareholder participation.

Impact not only on budget sustainability, but also the economy as a whole

We look at the impact of these measures. It would primarily be a support to the sustainability of public finances. But we also show through examples that it could improve the allocation of resources and make the economy more efficient. In so doing, it could also have a positive impact on growth.