What Are Austerity Measures?

Austerity characterizes severity or sternness and describes economic measures implemented by a government to reduce public-sector debt by significantly curtailing 澳洲幸运5官方开奖结果体彩网:government spending.

How Austerity Measures Work

澳洲幸运5官方开奖结果体彩网:Austerity measures are considered harsh economic policies intended to reduce the government's 澳洲幸运5官方开奖结果体彩网:budget deficit. These policies can include reductions in government spending and increased taxes. Austerity measures are commonly used with 澳洲幸运5官方开奖结果体彩网:contractionary fiscal policy or when a government faces debt default.

When a government increases its taxes, it generates more revenue. When a government reduces its spending, it has more money to pay down its debt. Austerity can be contentious for political and economic reasons. Though austerity measures can control a government's budget, they impact the day-to-day life of citizens.

The 澳洲幸运5官方开奖结果体彩网:global economic downturn that began in 2008 left many governments with reduce🍸d tax revenues and exposed what some believed were unsustainable spendin♏g levels. Several European countries, including the United Kingdom, Greece, and Spain, turned to austerity to alleviate budget concerns.

Types of Austerity Measures

A government that implements austerity measures is willing to take steps to bring financial health back to their budgets. Reducing government spending ꦆcan take on many forms and commonly includes cuts in government programs or changes to tax polic🦋ies, including:

• Limit unemployment benefits
• Extend the eligibility age for retirement and health care benefits
• Freeze or reduce government employees' wages
• Decrease funding for social or welfare programs
• Increase income taxes
• Lower the minimum wage
  

Examples of Austerity Measures

During the Great Depression in the 1920s, the United States implemented austerity measures to address unemployment that jumped from 4% to 12%, and the 17% decline in the 澳洲幸运5官方开奖结果体彩网:gross national product (GNP). President Harding cut spending from $6.4 billion in 1920 to $3.3 billion in 1922.

Austerity measures were taken in Greece in 2013 during its 澳洲幸运5官方开奖结果体彩网:debt crisis. Greece's economic problems started during the 2008-2009 financial crisis, threatening default on debt payments to the 澳洲幸运5官方开奖结果体彩网:European Union (EU). Greece suffered from the 澳洲幸运5官方开奖结果体彩网:Great Recession, with an unemployment rate increase from 7.7% in 2008 to 28.3% in 2013. After measures were implemented, which included a tax structure overall, the unemployment rate decreased and stood at 11.5% in September 2023.

The Bottom Line

Austerity measures are severe policies enacted to improve the financial health of the government. Though they help the 澳洲幸运5官方开奖结果体彩网:balance sheet, measures ꦰoften harshly impact citizens. How and when they are implemented and who they directly impact are matters of consideration in determining whether or not the measures improve the economy and society.