Clearly, the task is to increase the incentive to consolidate in the good times in order to avoid easing fiscal policy as seen in Germany and France in 2001 and 2002. Introduction of exceptions for certain expenses, such as investments, will add to the already significant technical calculation problems. Moreover, not all investments are equally appropriate for strengthening the future potential for growth.
Policy implications In the context of a modest recovery and less favorable financial conditions, what can policy makers in Latin America do to make the best of things for their economies? As always, there is no valid one-size-fits-all response, and desirable measures necessarily depend on each country’s circumstances. But two separate situations may help us identify a few policy options.