Fiscal consolidation is a policy intended to reduce deficits and the accumulation of debt, according to the Organisation for Economic Co-operation and Development. The term typically refers to a government economic policy.
Fiscal consolidation can have long-term benefits, but whether it is successful depends on how it is designed and implemented. According to Jean-Claude Trichet, writer for "The Financial Times," adjusting spending while boosting long-term growth is the most effective strategy.
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Strategies for fiscal consolidation must be adapted to different economies. Governments and monetary policies vary widely around the world and are subject to different influences, both within and outside a country.
Economic uncertainty has increased in recent years as a result of the recession, widespread unemployment and housing problems. There is ongoing debate about what the best strategy to follow and whether fiscal consolidation is more important than economic stimulus.