1.1. If governments sometimes have the incentive and the capacity to use “creative accounting”, what instruments do taxpayers and citizens have at their disposal to establish realistic estimates of government budgets? As seen in the chapter, public deficits arise whenever government expenditure exceeds government receipts. This phenomenon may result from various factors, such as an increase in government expenditure, a decrease in taxation, or a decline in receipts due to an economic slowdown. The accumulation of deficits leads to a rise in public debt. This is precisely what happened in many countries in the wake of the 2007–08 financial crisis, when a combination of expensive bank bailouts, a decline in tax receipts due to recession, and an increase in government expenditure to fend off recession led to a record high deficit of 7.5 percent of GDP for the entire OECD area in 2010 and a record high public debt-to-

GDP ratio of 94 percent in 2014