Hi and welcome to the first ‘question of the week’ entry of 2011! Hoping that the New Year will bring in a lot of new knowledge and vocabulary!
The phrase that will be covered this week is “austerity measures”, which will be used in the following question:
Question: What are austerity measures?
Austerity measures are a way for governments to reduce their debts through cutting expenditures and increasing tax revenues. These debts come from money being borrowed from other countries, the world bank, the International Monetary Fund, or other financial institutions. If a government were not able to pay back its debts, then the lender would be less willing to lend money. As such, austerity measures are taken in order to regain the trust and willingness of lenders to lend.
An example of this is the Greek government, which during 2010 underwent a debt crisis. Member countries of the European Union provided funds for Greek to battle the crisis, however on condition that Greece implements austerity measures. These measures included a pay freeze, layoffs, pension plan changes, increase in taxes, and a focus on privatization. Other countries, such as England, Ireland, and Portugal have also implemented austerity measures to minimize its debts.
In short: austerity measures are a means for a government to minimize its debts and gain back trust in its lenders.
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