The situation is more challenging in countries where economic growth is sluggish and large fiscal imbalances have been accumulated. There is a risk of a vicious circle, which can develop as a result of the following: 1. Restrictive fiscal policies are politically difficult to implement and thus tend to be delayed, because of the feared negative impact on the economy. 2.
As countries show hesitation in addressing their budgetary problems, access to financial markets tends to become more difficult. 3. When market access deteriorates, the budgetary measures required to restore confidence are much more drastic and painful. Some observers, especially outside Europe, have suggested that European democracies are not able to deal with such a vicious circle.