Having moved in advance of the normal deadlines, the additional measures needed to achieve a balanced budget in 2014 must now be rapidly established. This is what the markets are mainly looking at. There is a risk that these measures will distort the structure of the adjustment, appropriately based to a large extent on expenditure cuts.
Unless other expenditure items are also cut, it will not be possible, however, to use the power to enact tax and welfare reforms to complete the adjustment in 2013–14 without raising taxes.