The composition of fiscal adjustments : some principles

Large and differentiated fiscal adjustments underway in EU countries require credible strategies, including a growth-friendly approach to consolidation design. This brief captures in a summary fashion the main underlying principles for fiscal adjustments of high quality. While setting some general markers, it acknowledges the complexity of this debate, which blends macroeconomic and microeconomic considerations, country-specific features, and a dimension of political choice in consolidation strategies. The brief concludes that while some emphasis on expenditure restraint is generally part of well-designed consolidations, one should pick-up growth-friendly measures in a comprehensive approach on both the spending and revenues sides. Fiscal adjustment offers an opportunity to improve the quality of public spending as well as the structure of the tax system.