Abstract
This paper summarizes current EU austerity programs and discusses various fiscal policy reform proposals under consideration. It points out political and theoretical problems with these proposals and makes the case for fiscal consolidation through spending reduction rather than tax cuts. The paper provides supply side evidence of non-Keynesian expansions from spending cuts and identifies austerity and fiscal consolidation concerns for policy makers. The paper concludes that while the timing of spending cuts is important and there are political risks to fiscal consolidations which may frighten politicians, the economic payoffs justify austerity programs based primarily on budget and spending cuts.
Published Version
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