Contractionary Fiscal Policy

Fiscal austerity

Policies aimed at reducing government budget deficits through spending cuts, tax increases, or both.

Goals of fiscal austerity

Stabilizing government finances, reducing national debt, and restoring fiscal sustainability.

Canadian Fiscal Consolidation (1995)

Efforts by the Canadian government to reduce budget deficit through significant budget cuts under Prime Minister Jean Chrétien.

Greek Austerity Program (2010-2018)

Implemented to address the Greek debt crisis, involving public sector wage cuts, increased taxes, and privatization.

Mandate of the Greek Austerity Program

Mandated by the IMF, ECB, and EC in exchange for bailout packages.

Impact of Greek Austerity

Led to significant social unrest and political instability in Greece.

EU Stability and Growth Pact (1997)

Imposed fiscal discipline on EU member states to limit government deficits and debts.

Objectives of the Stability and Growth Pact

Limit government deficits to 3% of GDP and debt levels to 60% of GDP.

U.S. Budget Control Act (2011)

Legislation aimed at addressing national debt and deficit by imposing caps on discretionary spending.

Supercommittee established by Budget Control Act

Tasked with identifying further budget savings to control the deficit.

Australian Austerity Measures (2014-2017)

Efforts by the Australian government to reduce budget deficit through spending cuts and tax increases under PM Tony Abbott.

Cuts to public services

Reductions in funding allocated for government services as a part of austerity measures.

Increases to taxes and fees

Raising the amount citizens must pay to the government, commonly implemented during austerity.

Fiscal sustainability

The ability of a government to manage its budget without incurring debt.

Debt crisis

A situation where a government cannot meet or has difficulty meeting its debt obligations.

Budget deficit

A financial situation where expenses exceed revenues.

Privatization of state-owned assets

The process of transferring ownership of government enterprises to private entities.

Social unrest

Public disturbance or disorder caused by dissatisfaction with government policies.

Political instability

A situation where governance is disrupted due to changes in leadership, policy, or social unrest.

European Central Bank (ECB)

The central bank for the eurozone, responsible for monetary policy.

International Monetary Fund (IMF)

An international financial institution that provides loans and supports economic reforms.

European Commission (EC)

The executive branch of the European Union responsible for proposing legislation and enforcing EU law.

Targets for fiscal discipline under the Stability and Growth Pact

Deficit limits of 3% of GDP and debt limits of 60% of GDP for Eurozone countries.

Austerity measures

Government policies aimed at reducing budget deficits, which may include spending cuts and tax increases.

Public spending cuts

Reductions in government expenditures on public services.

Fiscal policies

Strategies by a government regarding taxation and spending to influence the economy.

National debt

The total amount of money that a country's government has borrowed and has yet to repay.

Stabilizing government finances

Efforts to balance a government’s budget and manage its debts.

Budget cuts

Reductions in the planned expenditure by organizations, particularly those funded by the government.

Economics of austerity

The study of how austerity measures affect economic growth and public welfare.

Discretionary spending

Government expenditures that are not fixed by law, allowing for adjustments in the budget.

Bailout packages

Financial assistance provided to a country or institution to prevent bankruptcy or default.

Tax reform

Changes to the tax system aimed at increasing revenue, fairness, or economic efficiency.

Public sector wages

Salaries paid to employees of the government.

Pensions

Payments made to retired individuals based on their previous employment.

Economic recovery

The phase following a recession where the economy begins to grow again.

Sovereign debt

Money that a country's government has borrowed and is required to pay back.

Fiscal consolidation

Policies aimed at reducing deficits and debt accumulation.

Economic stability

Condition where an economy experiences constant growth and low inflation.

Financial crisis

A situation in which the financial system of a country experiences sharp disruptions.

Government services

Services that are provided by the government to its citizens.

Policy measures

Actions taken by a government to influence economic conditions.

Revenue increase

The process of raising the government's income through taxes or other means.

Public welfare programs

Government programs aimed at providing assistance to those in need.

Cuts to welfare programs

Reductions in government funding for social support services.

Economic efficiency

The optimal use of resources to achieve the best possible outcome.