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Successfully consolidation and reform

These states have consolidated their budgets sustainable. Apart from Greece, Spain and Germany, almost all OECD countries have built up high levels of government debt. According to the Stability and Growth Pact, the debt ratio should not exceed 60 percent of gross domestic product.

Germany is approaching straight at the 80-percent mark. How is it possible to consolidate such a huge state budget deficit? Since the Second World War had already, many OECD countries sort their budgets newly constructed and reduce debt. The results are quite different. Some countries have been successful others failed in every aspect. What is the difference so the different ways? On the other hand, what is this that unites the successful consolidation strategies?

There are two approaches: increase revenue or reduce spending. Both are not without risks. First, this strategy could be pursued to higher revenues. These are successful examples, despite the enormous political potential seduction. In the same time, globalization. There is a noticeable competition between tax systems. Finally, the tax rates important location factors and high taxes are brake pads for growth. In a crisis, the state must stabilize expectations through fiscal stimulus. Here, however, is not seen it in a long-term consolidation is not only short-term, but also dynamic and medium-to long-term effects. Between 1980 and 2005, many countries have saved powerfully from the debt crisis.

Five states succeeded in the consolidation period. The cuts were made mainly in the overall management, in the economic area (primarily in subsidies, less in investments). The social sector has been tackled only moderately. Against the background of demographic change in Germany, probably not be possible without cuts and restructuring, reached in the social budgets sustainable consolidation.

This means that the cuts should /and this is a great opportunity/ to be accompanied by reforms that lead to changes in incentives and the dynamics in the economy. To miss this opportunity would be a sin of omission to the younger generation!

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