Furthermore, amid persisting strains from balance-sheet adjustments, households and firms are not likely to increase their spending due to concerns over the adverse impact of the European debt problem as well as uncertainty regarding the “fiscal cliff,” that is, fiscal spending cuts scheduled to be implemented at the beginning of 2013 and the handling of tax cuts set to expire at the end of 2012.
(The fiscal austerity measures that have had to be taken are not just due to the € billion or so in additional net debt that can be linked to the guarantee, but also reflect the far larger impact of the ending of the construction boom on the Government’s tax revenue and spending needs.