While the exact path of fiscal adjustment in the immediate future will vary in light of country-specific circumstances, and in the case of Ireland will be agreed with the Troika, not reducing debt levels will have a detrimental effect on income and that effect will grow over time.
•  In the case of drawing down foreign reserves, a country may need to deal with possible slower growth in the monetary base. To offset the resultant shortage in liquidity supply to the market, a central bank may find it necessary to expand fundssupplying operations to a greater extent than before.