In this respect, fiscal policies have a great potential for fostering confidence and thereby supporting activity, even in the short run. Establishing a well designed medium-term consolidation strategy in those countries currently struggling with increasing fiscal imbalances would make a major contribution in this direction.
This would imply comprehensive and growth-friendly measures including, in particular, a courageous reform of the structure and level of public expenditure. Curbing spending growth would eventually also create further room for manoeuvre to address future pressure arising from pension systems and scope for future tax cuts.