Where countries are under strain, fiscal austerity measures may be needed to signal the political commitment to achieving consolidation, even though this can also reduce growth, at least in the short term.
The cost and availability of funding for many euro area countries remains very sensitive to fiscal sustainability projections, probably exacerbated by the inability of these countries to issue the currency of their debt. Figure 7 Government debt ratios and bond rates  Sources: Haver Analytics, IMF.