Austerity

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In economics, austerity is when a national government reduces its spending in order to pay back creditors. Austerity is usually required when a government's fiscal deficit spending is felt to be unsustainable.

Development projects, welfare programs and other social spending are common areas of spending for cuts. In many countries, austerity measures have been associated with short-term standard of living declines until economic conditions improved once fiscal balance was achieved (such as in the United Kingdom under Margaret Thatcher, Canada under Jean Chrétien, and Spain under González).

Private banks, or institutions like the International Monetary Fund (IMF), may require that a country pursues an 'austerity policy' if it wants to re-finance loans that are about to come due. The government may be asked to stop issuing subsidies or to otherwise reduce public spending. When the IMF requires such a policy, the terms are known as 'IMF conditionalities'.

In the West, the most wartime austerity (1940-1945), which was followed by postwar austerity (1945-early 1950s).

[edit] Examples of austerity

• Austerity in Israel (1949-1959)
• Special Period (Cuba, 1991 onwards, after the collapse of the Soviet Union)
• Post-War United Kingdom see,: Britain-Economic history- Post-War era, 1945-1959, Rationing in the United Kingdom, Utility furniture.

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