Critics, such as the American economist Paul Krugman, caution that such consolidation will cause more harm than good in the present circumstances. In order to reduce the deficit, he argues, countries either have to cut public spending or increase taxes.
But , he adds, both of these measures are the wrong remedy in the light of the current economic slowdown as they would further dampen the already weakened aggregate demand and hence trigger a downward economic spiral. This debate has gathered further momentum following a study performed by the IMF2 on the size of fiscal multipliers in the crisis.