Under such assumptions, a complete freeze on government spending would reduce the euro area government deficit by around 1% of GDP each year, bringing it close to balance no sooner than 2016. A more timely fiscal adjustment would require the adoption of corrective measures already in 2010, absolute spending cuts in real terms or additional tax increases.
BIS Review 103/2009  3  Concluding remarks To conclude, the scale of the challenge for fiscal policy is considerable. Over the past 12 months, governments, like central banks, have taken unprecedented action to restore stability to the financial system and to tackle the largest recession in post-war history. This action was largely justified.