An International Comparison of Success Factors for Budget Consolidation Strategies

In numerous countries the global financial and economic crisis has entailed a surge of government debt, which will call for enhanced consolidation efforts in the future. In the past consolidation strategies focusing primarily on spending cuts proved sustainable, whereas mostly revenue-based strategies were less successful. A suitable institutional framework, e.g., budgetary expenditure ceilings, also contributes to a lasting fiscal consolidation. The short-term growth effects of budget balancing efforts are more disputed. Besides contractionary ("Keynesian") effects empirical studies also find expanisionary ("non-Keynesian") effects of ambitious consolidation programmes under certain conditions.