And a deliberately  2  International Monetary Fund, World Economic Outlook 2012. BIS central bankers’ speeches  5  protracted consolidation of public finances would also make it harder to maintain political support. Incidentally, the way in which consolidation is carried out also plays an important role in determining how quickly a country returns to healthy growth rates.
Studies3 show that countries which reduce their deficit by cutting government expenditure sustain significantly smaller growth losses than countries which do so by increasing taxes. The rationale behind this is that many measures such as streamlining the administrative apparatus or privatising state-owned enterprises not only yield potential savings for the public sector but could also improve macroeconomic productivity. 5.