A lack of confidence would undermine current fiscal stimulation, and correspondingly higher financing costs would make consolidation even more difficult. Furthermore, confidence in the soundness of public finances is a major prerequisite for both the stability of financial markets and the anchoring of moderate inflation expectations. Fiscal policy has to deliver sustainable public debt levels as a key policy priority at the current juncture.
Policies that promote competition, continue the development of the country’s infrastructure, and that provide a framework that fosters research and development, innovation and entrepreneurship are all important for limiting inflationary pressures. Fiscal policy also has an important role to play in containing domestic demand.