Political fragmentation and public debt development in European Union countries

This paper examines the relationship between the ideological fragmentation of government coalitions and the development of public debt in European Union countries.The study examines whether political polarisation and the ideological range of governing coalitions influence both short-term public debt dynamics and the long-term level of public debt.The empirical analysis is based on panel data from 16 EU member states covering the period 2002-2022 and uses two-way fixed-effects panel regression models with country-and year-fixed effects.Two dimensions of political fragmentation are analysed: government political polarisation (cab_wpolar) and the ideological range of coalition parties (cab_prefrange).The results indicate that political variables are not systematically associated with year-on-year changes in public debt.In contrast, several model specifications suggest that political polarisation may contribute to higher long-term public debt levels, while broader ideological coalitions may under certain conditions be associated with lower public debt.The findings suggest that political fragmentation primarily influences public finances through gradual long-term fiscal mechanisms rather than through immediate annual debt fluctuations.