5. Adjustment by Force: The Realization of Austerity

In “Adjustment by Force”, Guthmann presents the second stage of his statistical analysis of austerity in the Euro crisis, by testing hypotheses on the determinants of the realization of fiscal consolidation plans. Plan realization is operationalized as the difference between planned and realized austerity, based on plans and outcomes of various fiscal variables. As the empirical results show, for post-crisis EMU countries, negative NIIPs tend to be associated with considerably better plan realization. Not surprisingly, unexpected developments, such as growth surprises or the urgent need to recapitalize failing banks, also have strong effects, but these can at least partly be considered endogenous to the main variable of interest. Political variables, in contrast, ceased to have an effect. The argument that democratic policymaking has been undermined in the demand-led crisis countries is thereby clearly supported by the data. Guthmann also shows that the acknowledgement of context is key in the operationalization of fiscal adjustment. When plan realization is examined based on nominal spending figures, as opposed to the more prominent percentage-of-GDP operationalization found in the literature, results did actually indicate a significant overachievement of consolidation plans for post-crisis EMU deficit countries—with Greece being a case in point.