A term used frequently, especially in the wake of the Greek crisis, to mean that a government introduces measures to reduce public debt and regain competitiveness and implements them in the face of resistance. Wrongly, such efforts are criticized for undermining growth. For without appropriate steps, a state drifts further and further into debt and fails to regain the confidence of trading partners and investors. However, whether austerity programs are still effective after years of inaction, as in the case of Greece, is a difficult question to answer (the question, however, is, whether after long delay, rising bond yields, worsening economies and declining market confidence, such a program could still be done). In the end, all EMU member states will be forced to take over the losses of the deficit states via the monetary track. – See alignment automatism, bail-out, blame game, disfunctionality, currency area-related, blackmail potential, European Monetary Union, fundamental error, EMU explosive, cliff, fiscal, moral suasion, perpetual motion machine, policy clamp, policy default, Portugal crisis, bailout, risk premium, Rogoff study, shadow state, debt drug, debt union, solidarity, financial, sovereign debt pressure, stability and growth pact, fundamental error, transfer union, imbalances, EMU internal, constitutional article one, debt-productivity linkage, treaty compliance, growth-debt fact, historical, growth promotion.
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