This is not because  1  Debelle, G, “On Europe’s Effects on Australian Financial Markets”, Address to Bloomberg Seminar, Sydney, 14 February 2012. 2  BIS central bankers’ speeches  the size of the fiscal consolidations in individual countries is unprecedented, but rather because the consolidations are occurring simultaneously in a large number of countries.
Unusually, they are also taking place in an environment where output in the affected countries is considerably below potential. The economic literature is mixed on the effects of fiscal consolidation on growth. There are certainly some examples where consolidation has been associated with fairly strong GDP growth.