What is Austerity? Austerity is economic policy that focuses on raise taxes and reduce government spending. Although the term only suggests reducing spending rather than also raising taxes, in reality economy, refers to both.
see more
02/22/22: What does this date mean? What are the effects on our…
What is each washing machine symbol for?
To the austerity measures are taken by the government during a period of adverse economic conditions, to reduce its budget deficit using a combination of spending cuts or tax increases.
Governments usually adopt reduction measures when there are economic problems, especially when they cannot pay their debts.
The government can, for example, borrow in a foreign currency, which it cannot issue. Furthermore, when a government loses the authority to print money, austerity is the only option left.
When this type of situation occurs, banks and investors lose confidence in the government's ability to service the debt. The government or central bank may refuse to refinance existing debt or raise interest rates significantly.
However, the International Monetary Fund (IMF) can act as a lender of last resort. The IMF will only lend if the borrowing government adopts a specific economic policy. The IMF calls this type of policy and its conditionalities austerity.
Related Contents:
