This paper provides an analysis of the effectiveness of alternative fiscal instruments in the five major economies of Europe Ð France, Germany, Italy, Spain and the United Kingdom. In doing so, we derive estimates of the fiscal multiplier effect implied by direct tax, indirect tax, corporate tax, and government transfers. Newly estimated consumption functions facilitate a close examination of the impact of liquidity constraints and real interest rate effects on the transmission mechanism of fiscal policy. In line with evidence on the degree of financial deregulation, our findings suggest that the UK has the smallest proportion of liquidity constrained agents, while Germany has the most. France, Italy and Spain lie in between. Analysis shows that fiscal multipliers are affected by the interest rate response to fluctuations in output and inflation and to the proportion of liquidity constrained agents in the economy. Multipliers which target current wealth terms are favoured in countries with a greater degree of consumption smoothing.