Osborne s defenders might make the same argument for his fiscal policy. A credible policy of fiscal consolidation, they might say, will have the same exhilarating effect on confidence as fiscal consolidation itself.

What is notably missing is recognition of the need for greater flexibility on fiscal consolidation efforts. As the Commission has requested, countries with stronger fiscal positions should consider slowing their consolidation efforts in order to avoid aggravating the recession.

Japan plans to accelerate labor market reforms, strengthen competition, and advance fiscal consolidation to sustain domestic confidence.

First, we must concur on how to approach Greece s fiscal consolidation. Second, we need a comprehensive, commonly agreed reform agenda that will underpin that consolidation path and inspire the confidence of Greek society.

BERKELEY Across the globe, the debate over fiscal consolidation has the distinct sound of two sides talking past one another.

To meet this challenge, we have designed an economic strategy that rests on three pillars Europe, fiscal consolidation, and competitiveness.

Moreover, the critics object, the evidence in support of expansionary fiscal consolidations is flawed. In each case where fiscal consolidation supposedly was expansionary, the economy grew because of some third factor.

Between 2001and 2006, Prime Minister Junichiro Koizumi aggressively tackled Japan s fiscal problems. Koizumi sought smaller government and set clear numerical targets for fiscal consolidation, including a primary budget balance in 10 years.

When fiscal consolidation turns on a predetermined debt ratio to be achieved at a predetermined point in the future, the primary surpluses needed to hit those targets are such that the effect on the private sector undermines the assumed growth rates and thus derails the planned fiscal path. Indeed, this is precisely why previous fiscal consolidation plans for Greece missed their targets so spectacularly.

But the overall policy mix has been sub optimal, with too much front loaded fiscal consolidation and too much unconventional monetary policy (which has become less effective over time). A better approach in advanced economies would have comprised less fiscal consolidation in the short run and more investment in productive infrastructure, combined with a more credible commitment to medium and long term fiscal adjustment and less aggressive monetary easing.

Fiscal consolidation was not, however, the result of formal fiscal rules. While several countries established legal limits to control spending, deficits, and debt, in some cases for example, Argentina, Ecuador, and Venezuela such laws were not enforced.

France is fully committed to a fiscal consolidation effort that returns it to a balanced budget by 2017. This is not just a political commitment we have enshrined France s fiscal path in a law adopted in November.

In fact, most of the world believes that Germany should adopt a more expansive fiscal policy. According to this view, austerity is counter productive, because it induces slowdowns and recessions that make long term fiscal consolidation more difficult.

Countries with weaker initial fiscal positions such as Greece, the UK, Ireland, Spain, and Iceland have been forced by the market to implement early fiscal consolidation. While that could be contractionary, the gain in fiscal policy credibility might prevent a damaging spike in long term government bond yields.

Fiscal consolidation means less public spending. And less spending means less upward pressure on prices which is the last thing Europe needs in a deflationary environment.

Unfortunately, the fiscal policy currently adopted by various advanced economies deviates sharply from this path of credible medium term consolidation combined with short term additional stimulus.

To be effective, monetary stimulus needs to be accompanied by temporary fiscal stimulus, which is now lacking in all major economies. Indeed, the eurozone, the UK, the US, and Japan are all pursuing varying degrees of fiscal austerity and consolidation.

LOS ANGELES The debate over fiscal expansion versus consolidation continues to divide the developed world. In response to the global recession of 2008, the United Kingdom embarked on an austerity program while the United States enacted an 800 billion fiscal stimulus.

And, tough talk notwithstanding, the Obama administration has yet to offer a credible roadmap for fiscal consolidation. Doing so would reassure American taxpayers worried about current deficits.

The first is transatlantic divergence over how best to assure a return to solid growth. The United States favors continuing economic stimulus, while the European Union prefers fiscal consolidation.

But hints of new fiscal imprudence or of backsliding on long term debt consolidation and reduction can drive up borrowing costs dramatically. In these circumstances, the additional costs of debt service easily outweigh any gains that might come from some measure of fiscal relaxation.

Likewise, the unemployment rate has fallen throughout the crisis, reaching 5.2 , the lowest level since reunification. And the German government s commitment to fiscal consolidation enabled it to achieve a surplus last year by 2018, the fiscal surplus is expected to amount to 1.5 of GDP.

Energy and carbon taxes can produce less economic pain and more gain than conventional taxes can. Europe needs fiscal consolidation, reductions in carbon emissions, and a strategy for economic growth.

Economists are not certain whether there are short run costs or benefits to rapid fiscal consolidation. My view is that it depends on facts and circumstances, such as the size, credibility, and timing of the consolidation the mix of spending and tax cuts whether consolidation is mostly permanent and structural (for example, a change in pension formulas) and, of course, the stance of monetary policy.

Second, the troika based its programs on overly optimistic assumptions. It misjudged the consequences of fiscal consolidation and credit constraints, underestimating the contraction of employment and overestimating exports and privatization receipts.

Fiscal consolidation has made limited headway, and, with interest rates now rising, the effect on the budget of a higher burden of debt servicing could be a matter of some concern.

It follows that the best thing the ECB could do to encourage fiscal consolidation and structural reform is to banish the specter of deflation. Only full bore quantitative easing can do that.

There is exactly zero evidence in Europe today that inflation is just around the corner. And, if current European governments are not committed to austerity and fiscal consolidation, then which governments are?

The belief that the fiscal multiplier is usually low may have contributed to underestimation of the short run economic costs of austerity policies and thus to persistently optimistic forecasts of growth and employment. Recent research by the International Monetary Fund on the context specific variability of fiscal multipliers has raised serious questions about the costs and effectiveness of rapid fiscal consolidation.

Fiscal consolidation. Large budget deficits are absorbing the national savings that should be used to expand business investment, and are increasing the national debt that will have to be financed by future taxes.

Given this, governments should provide specific fiscal consolidation mechanisms that are visibly likely to take effect when the time comes. Raising the retirement age for future pension benefits qualifies as such a mechanism.

America s gravest fiscal problem is the short and medium run deficit between tax revenues and spending. This deficit is entirely of Bush s own creation, having enacted and now seeking to extend tax cuts that are not cuts at all, because they merely shift the burden of fiscal consolidation onto future generations.

Finally, in the face of political opposition to fiscal consolidation, especially in the US, there is a risk that the path of least resistance becomes continued monetization of fiscal deficits. Eventually (once the slack in goods and labor markets is reduced), this would push inflation expectations and yield curves higher.

In the periphery of the eurozone, the problem is the opposite bond vigilantes are demanding that Greece, Ireland, Portugal, Spain, and Italy front load fiscal consolidation or watch their borrowing costs go through the roof, risking them their market access and triggering a public debt crisis. Markets don t care that front loaded fiscal consolidation is exacerbating recession and thus making the goal of reducing debt and deficits as a share of GDP near impossible to achieve.

Europe is slipping back into recession just when recovery in the United States is finally getting some traction. nbsp That has undermined the case for fiscal consolidation, which is so heavily favored in Europe.

PARIS Together with fiscal consolidation, structural reform is the new European mantra. International organizations and European Union bodies regard such reform as a prerequisite of economic recovery, growth, and alleviation of the unemployment plague.

The implications of this shift may be far reaching. The German model for resolving the debt crisis and returning to internal or external balance relies on fiscal consolidation and structural reforms for the deficit countries.

But this sort of fiscal consolidation can be achieved only if a majority perceives it as being socially equitable. Recipients of social and corporate welfare alike, as well as civil servants, must share the sacrifice.

Outside the eurozone, even the United Kingdom is struggling to restore growth, owing to the damage caused by front loaded fiscal consolidation efforts, while anti austerity sentiment is also mounting in Bulgaria, Romania, and Hungary.

Fiscal consolidation is the second pillar of France s economic strategy. France has not adopted a balanced budget in the last 30 years, and its public debt reached an unsustainable 1.7 trillion ( 2.2 trillion) in 2011.

Contrary to the prevailing wisdom nowadays, some degree of Keynesian demand management in the transition to a more sustainable growth pattern is not in conflict with restoring fiscal balance over a sensible time period. On the contrary, applied both individually and together, fiscal stimulus and consolidation are necessary parts of the adjustment process.

A true Keynesian would have said that what was needed in 2010 was fiscal expansion, not consolidation. Osborne believed, or appeared to believe, that austerity would speed up economic recovery, by restoring confidence in government finance.

With good reason. Europe is slipping back into recession just when recovery in the United States is finally getting some traction. That has undermined the case for fiscal consolidation, which is so heavily favored in Europe.

NEW YORK Over the last two years, the majority of countries in the world chose to expand public spending in order to buffer the impact of the global financial crisis on their economies and populations. But, this year, with signs of economic recovery emerging, advanced countries have quickly shifted from fiscal stimulus to fiscal consolidation.

Nicola Sturgeon, First Minister of Scotland and leader of the SNP, attacked the cozy consensus around fiscal consolidation in Westminster. The deficit, she rightly said, was a symptom of economic difficulties, not just the cause of them.