What is an austerity measure? – Know the details about this policy

Let’s take into account that an austerity measure refers to a series of policies or actions implemented by a government. In addition, that they are executed with the objective of reduce public spending. As well as, they seek to improve the economic situation of a country.

In this sense, these measures are usually adopted at times of financial crisis, high public debt or fiscal imbalances. That is, when the government needs to control its budget deficit and avoid a situation that threatens sustainable development.

Therefore, we will show you some relevant details about these austerity measures and their impact on the place where they are carried out. Also, you will discover influence on tax policy and public spending in the region. Well, governments seek to save millions in order to guarantee sustainability through taxes, among other examples.

What is austerity in law?

In the legal context, we can say that austerity is a principle or criterion that we put into practice in the interpretation and application of legal regulations. It should be noted that he himself seeks promote moderation and the restriction in the exercise of rights and powers, avoiding excesses or abuses.

So, the principle of austerity in law implies that legal norms must be interpreted and restrictively applied. Therefore, unnecessary expansions or extensions of its scope must be avoided.

In other words, if a norm establishes a restriction or limitation of rights or powers of the people, we must understand that said barrier will only be applied to the extent necessary. In other words, we cannot extend it beyond what is strictly urgent.

Consequently, the principle of austerity in law is related to the principle of legality. Since, it establishes that the restrictions on rights and freedoms must be embodied in the law. Therefore, we cannot apply them arbitrary way. In this sense, both principles seek to protect the fundamental rights of individuals and prevent abuses by the authorities.

Examples of austerity

Taking into account that austerity measures may imply cuts in public spending in areas such as education, health, pensions, public investment and social programs. We should note that they can also include tax increases, the reduction of subsidies and the implementation of reforms to improve efficiency, reducing government costs.

In addition to this, we will show you some common examples of austerity in general. In this way, it will be much easier for us to understand what this term means and the link with the measures taken by the federal authority with the objective of take care of the whole society. Among them we can find the following:

  • Reduction of public spending.
  • Tax increase.
  • Pension system reforms.
  • Elimination of subsidies.
  • Freeze or reduction of wages.
  • Labor reforms.

It is important that we take into account that these measures may have different impacts and consequences on the economy and society. Due to the fact that its implementation can generate debates and controversies around its effectiveness and equity. All of this inevitably generates resistance from any political movement that disagrees with them.

Reasons for taking an austerity measure

In principle, we must know that the purpose of austerity measures is to balance public finances, reduce debt. As well as, restore the confidence in financial markets and international organizations. However, there are various reasons why a government may take austerity measures and some of the more common causes include:

  • Economic crisis: Occurs when a country is going through a difficult situation, such as a recession, high inflation, an unsustainable account payable or financial problems. In those cases, the government can implement austerity measures.
  • Fiscal imbalances: We will see if the government faces an imbalance in its public finances, such as a high fiscal deficit or a growing public debt. It is then, when the authorities choose to establish this kind of policy.
  • Pressure from financial markets and international organizations: In some cases, the International Monetary Fund (IMF) or the World Bank require the national government to application of those policies. They are usually a condition of granting loans or financial assistance. In addition, they make positive suggestions, such as adopting austerity measures to achieve a better recovery after the pandemic.
  • Need to comply with international commitments: When a country finds itself in situations in which it must comply with the requirements of international treaties. As, for example, the European Union in the case of member countries, they can implement austerity measures to conform to established standards.
  • Long-term fiscal sustainability: In some cases, the government adopts these policies as a strategy to ensure the same in the long term. which is possible, reducing excessive public spending and avoiding accumulating high levels of debt.

In this sense, it is important that we take into account that austerity measures can generate significant impacts on the economy and in society. For that reason, and their adoption is often the subject of debate and controversy, since they can affect the well-being of the population and public services.

How is an austerity measure applied?

In general, the way to carry out this type of policy implies a combination of actions and decisions that are implemented at the government level. Consequently, below, we will describe in detail the most common steps in the application of an austerity measure:

  • Analysis of the situation: This involves examining indicators such as the budget deficit or public debt. Also economic growth, inflation, among others.
  • Design of the austerity plan: Which can be elaborated internally by the government or in collaboration with International organizationsdepending on the situation.
  • Approval and communication: It is important that the authorities communicate clearly and transparently the measures that will be implemented. As well as the objectives and application schedule.
  • Spending cuts: This may involve eliminating non-priority programs. It also involves the decrease in wages or the reduction of subsidies.
  • Increase in income: These measures seek to generate more resources for the State through taxes in order to help balance public finances.
  • Structural reforms: Here we can observe changes in the pension system and the liberalization of economic sectors. In the same way, we find the simplification of bureaucratic procedures or the promotion of business competitiveness.
  • Monitoring and evaluation: During and after the implementation of austerity measures, the government carries out constant monitoring in order to assess their effectiveness.

However, it is important to highlight that the application of austerity measures can have significant socio-economic implications. Well, they could affect different sectors of society. Therefore, it is necessary to consider the impact on equity and the protection of the most vulnerable groups throughout the process of applying these temporary policies.

Economic consequences of applying an austerity measure

Despite the fact that its purpose is to overcome some financial crisis or internal problems in the nation, we must take into account that these policies also may suffer negative impacts in the economy and in the population. Due to the fact that they can result in the consequences that we will mention below:

  • economic contraction.
  • Increase in unemployment.
  • Reduction of public services.
  • Decrease in investment.
  • Increased inequality.

It is important to highlight that austerity measures are the subject of debate in the world, since their effectiveness and equity are controversial issues. Some argue that these measures can aggravate inequality and harm the most vulnerable sectors of society. However, others argue that they are necessary to restore long-term economic stability.

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