Austerity
02 May 2022
a set of economic policies, usually consisting of tax increases, spending cuts, or a combination of the two, used by governments to reduce budget deficits.
Example – Greece’s Parliament approves unpopular new austerity measures, agreed to as a condition of the ongoing EU-IMF bailout. The austerity measures forced the Greek government to cut spending and increase taxes. They cost 72 billion euros or 40% of GDP. As a result, the Greek economy shrank 25%. That reduced the tax revenues needed to repay the debt.
