History of Austerity in Timeline
Austerity is a set of political-economic policies implemented by governments to reduce budget deficits. This is typically achieved through spending cuts, tax increases, or a combination of both. These measures are usually adopted when governments face difficulties borrowing or repaying existing loans. By reducing the budget deficit, austerity aims to align government revenues more closely with expenditures. Supporters argue that austerity reduces borrowing needs and demonstrates fiscal responsibility to creditors and credit rating agencies, potentially making future borrowing easier and cheaper.
3 hours ago : Trump's Economic Tone Shifts Towards Austerity Amid Tariff Impact Concerns and Broken Promises.
Donald Trump's rhetoric shifted from prosperity to austerity due to potential tariff impacts. Concerns rose as Trump seemingly changed his economic stance and failed to keep his initial promises, sparking reactions.
1915: US Occupation of Haiti
In 1915, during the United States occupation of Haiti, austerity policies were implemented, favoring American corporations with low tax rates while increasing taxes for Haitians. A forced labor system was also established, creating a "corporate paradise" in occupied Haiti.
1921: Austerity as Class Oppression
Clara E. Mattei posits that austerity is less of a means to "fix the economy" and is more of an ideological weapon of class oppression. She traces the origins of modern austerity to post-World War I Britain and Italy, when it served as a "powerful counteroffensive" to rising working class agitation and anti-capitalist sentiment. In this, she quotes British economist G. D. H. Cole writing on the British response to the economic downturn of 1921.
1933: Krugman's comparison to the US recovery from 1933 to 1936
In January 2013, Paul Krugman compared Latvia's situation to the partial US recovery from 1933 to 1936 after the Great Depression.
1936: Krugman's comparison to the US recovery from 1933 to 1936
In January 2013, Paul Krugman compared Latvia's situation to the partial US recovery from 1933 to 1936 after the Great Depression.
1980: Electoral Impact of Austerity Measures
From 1980, a study by Gabriel et al., analyzing elections in 124 European regions from eight countries between 1980 and 2015, found that fiscal consolidations increased the vote share of extreme parties, lowered voter turnout, and heightened political fragmentation.
2006: Latvia's Trade Deficit in 2006
Latvia's trade deficit improved from over 20% of GDP in 2006 to under 2% GDP by 2012.
2007: Latvia's Trade Deficit in 2007
Latvia's trade deficit improved from over 20% of GDP in 2006 to 2007 to under 2% GDP by 2012.
2008: Financial Crisis Begins in the UK in 2008
Following the 2008 financial crisis, a period of economic recession began in the UK.
2008: Greek Unemployment at 8%
In 2008, before the major impact of the crisis, unemployment in Greece was at 8%.
2008: US Response to 2008 Economic Crash
In 2008, the United States's response to the economic crash was largely influenced by Wall Street and IMF interests, favoring fiscal retrenchment.
2008: Latvia Enters Recession in 2008
Triggered by the collapse of the second largest bank, Latvia entered a severe recession in 2008 as a result of an unsustainable current account deficit and large debt exposure amid the softening world economy.
April 2009: David Cameron Popularizes "Age of Austerity"
In April 2009, UK Conservative Party leader David Cameron popularized the term "age of austerity" during a keynote speech. He committed to ending what he described as years of excessive government spending in April 2009.
2009: Greek Government Debt Increase
In 2009, the Greek government debt started increasing. Between 2009 and 2017, it increased from €300 billion to €318 billion.
2009: Latvia's GDP Plunges in 2009
In 2009, triggered by the collapse of the second largest bank, Latvia's GDP plunged 18%.
2009: Protests Against Austerity in 2009
In 2009, workers and students in Greece and other European countries demonstrated against cuts to pensions, public services, and education spending as a result of government austerity measures.
June 2010: George Osborne's Budget Speech in June 2010
In June 2010, Chancellor George Osborne announced the UK's austerity program, aiming to eliminate the structural current budget deficit and reduce national debt as a percentage of GDP through public expenditure reductions and tax increases.
2010: Austerity Blamed for Deaths in the UK Between 2010 and 2017
Austerity has been blamed for at least 120,000 deaths between 2010 and 2017 in the UK, with one study putting it at 130,000 and another at 30,000 in 2015 alone.
2010: Austerity Named Merriam-Webster's "Word of the Year"
In 2010, Merriam-Webster's Dictionary chose "austerity" as its "Word of the Year." This was due to the high volume of web searches for the word, with over 250,000 searches on the dictionary's online tool, coinciding with increased coverage of the debt crisis in 2010.
2010: Protests Against Austerity in 2010
In 2010, workers and students in Greece and other European countries demonstrated against cuts to pensions, public services, and education spending as a result of government austerity measures.
June 2011: Demonstrations in Greece Against Austerity Measures in June 2011
In June 2011, massive demonstrations occurred throughout Greece following the announcement of plans to introduce austerity measures. In Athens alone, 19 arrests were made, while 46 civilians and 38 policemen had been injured by 29 June 2011.
June 2011: Greek Trade Union Strike
On 27 June 2011, Greek trade union organizations initiated a 48-hour labour strike as a response to the austerity package, preceding a parliamentary vote on the matter. This was the first strike of its kind since 1974. Massive demonstrations were also held to pressure members of parliament to vote against the austerity package.
June 2011: Approval of Second Austerity Measures in Greece
On 29 June 2011, the second set of austerity measures was approved in Greece, with 155 out of 300 members of parliament voting in favor. A United Nations official warned that these measures could potentially violate human rights.
August 2011: IMF on Fiscal Sustainability
In August 2011, IMF managing director Christine Lagarde discussed the need for fiscal sustainability through credible consolidation plans, advising against overly rapid austerity measures that could hinder economic recovery. She emphasized a balance between medium-term consolidation and short-term growth support, suggesting decisions on future consolidation should allow for policies that support growth in the near term, as stated in August 2011.
September 2011: Federal Reserve on Fiscal Sustainability
In September 2011, Federal Reserve Chair Ben Bernanke addressed the compatibility of fiscal sustainability and economic recovery. He suggested implementing a credible long-term deficit reduction plan while being mindful of the immediate impact on economic recovery. According to Bernanke, acting now to put in place a credible plan for reducing future deficits over the long term can serve both objectives, as of September 2011.
December 2011: IMF/EU Program Concludes in Latvia
In December 2011, the IMF/EU program successfully concluded in Latvia. The government remained committed to fiscal prudence and reducing the fiscal deficit.
2011: Decrease in Greece's Budget Deficit
According to the CIA World Factbook, Greece decreased its budget deficit from 10.4% of GDP in 2010 to 9.6% in 2011.
2011: Debt-to-GDP Ratio for the EA17
In 2011, Eurostat reported that the overall debt-to-GDP ratio for the EA17 was 87.3%.
2011: Latvia's Economy Returns to Growth in 2011
In 2011, Latvia's economy returned to growth, outpacing the 27 nations in the EU, while implementing significant austerity measures.
2011: US Government Budget Deficit
In 2011, the US government budget deficit was approximately 10% of GDP (8.6% of GDP of which was federal), offsetting a foreign financial surplus of 4% of GDP and a private-sector surplus of 6% of GDP.
2011: Protests Against Austerity in 2011
In 2011, workers and students in Greece and other European countries demonstrated against cuts to pensions, public services, and education spending as a result of government austerity measures.
2011: Latvia's Export Sector Shows Strong Growth in 2011
In 2011–12, Latvia's economy had not returned to pre-crisis levels despite strong growth, especially in the export sector.
February 2012: Greek Parliament Approves Third Round of Austerity in February 2012
On 12 February 2012, the third round of austerity was approved by the Greek parliament and met strong opposition, especially in Athens and Thessaloniki, where police clashed with demonstrators.
April 2012: Martin Wolf's Analysis of GDP Growth and Austerity
In April 2012, economist Martin Wolf analyzed the relationship between GDP growth from 2008 to 2012 and reductions in budget deficits due to austerity policies in European countries, concluding that large fiscal contractions bring recessions and big contractions bring depressions.
April 2012: Paul Krugman's Analysis of GDP and Budget Deficits
In April 2012, economist Paul Krugman analyzed the relationship between GDP and the reduction in budget deficits for several European countries, concluding that austerity was slowing growth. According to his analysis, one euro of austerity yields only about 0.4 euros of reduced deficit, even in the short run.
May 2012: François Hollande Wins French Presidential Election
In May 2012, François Hollande won the French presidential election opposing austerity measures. He promised to eliminate France's budget deficit by 2017 by cancelling recently enacted tax cuts and exemptions for the wealthy, raising the top tax bracket rate to 75% on incomes over one million euros, restoring the retirement age to 60 with a full pension for those who have worked 42 years, restoring 60,000 jobs recently cut from public education, regulating rent increases, and building additional public housing for the poor.
June 2012: Laura Tyson on Budget Deficits
In June 2012, Economist Laura Tyson wrote that an increase in the deficit, whether through increased government spending or reduced taxes, leads to an increase in demand.
July 2012: Shift in Private Sector Financial Balance
In July 2012, Martin Wolf explained that the sudden shift in the private sector from deficit to surplus forced the US government balance into deficit.
September 2012: US Private-Sector Surplus
By September 2012, the US private-sector's surplus of savings over investment remained above $800 billion.
September 2012: Eurozone Unemployment Rates Rise
In September 2012, Eurostat reported that Eurozone unemployment reached 11.6%, up from 10.3% in 2011.
October 2012: IMF Announcement on Austerity Program Forecasts
In October 2012, the IMF announced that its forecasts for countries implementing austerity programs had been consistently overoptimistic, suggesting that tax hikes and spending cuts caused more damage than expected.
October 2012: IMF Announces Overoptimistic Forecasts for Austerity Programs in October 2012
In October 2012, the IMF announced that its forecasts for countries that implemented austerity programs have been consistently overoptimistic, suggesting that tax hikes and spending cuts have been doing more damage than expected.
2012: Latvia's Economy Continues Growth in 2012
In 2012, Latvia's economy continued its growth, outpacing the 27 nations in the EU, while implementing significant austerity measures.
2012: Latvia's Fiscal Deficit and GDP Growth in 2012
In 2012, Latvia's fiscal deficit was 2.7% of GDP. GDP grew by 4.5% and unemployment rose to 14.3%. Latvia's currency, the Lati, fell from $0.47 per US dollar in 2008 to $0.55 in 2012, a decline of 17%. Latvia's trade deficit improved from over 20% of GDP in 2006 to 2007 to under 2% GDP by 2012.
2012: Greek Debt Restructuring
In 2012, a debt restructuring occurred in Greece, contributing to the increase in government debt between 2009 and 2017. The critical debt-to-GDP ratio shot up from 127% to 179% mostly due to the severe GDP drop during the handling of the crisis.
January 2013: Krugman's Assessment of Latvia's Recovery in January 2013
In January 2013, Paul Krugman wrote that Latvia had yet to regain its pre-crisis level of employment and characterized the recovery as a 'Depression-level slump'.
March 2013: Eurozone Unemployment Reaches Record Levels
In March 2013, Eurostat reported that Eurozone unemployment reached a record level of 12.1%, up from 11.6% in September 2012.
April 2013: Rogoff and Reinhart on Austerity and Structural Reforms
In April 2013, Economists Kenneth Rogoff and Carmen Reinhart wrote that "Austerity seldom works without structural reforms – for example, changes in taxes, regulations and labor market policies – and if poorly designed, can disproportionately hit the poor and middle class."
2013: Greek Unemployment at 27%
By 2013, the unemployment rate in Greece had risen sharply to 27% as a result of the economic crisis and austerity measures.
2013: Latvia's Output Below Pre-Crisis Level in 2013
Despite growth in previous years, by 2013, Latvia's output was still below the pre-crisis level.
2014: Mark Blyth's Book on Austerity Claims it Passes Debt to Working Classes
In 2014, Mark Blyth's book on austerity claims that austerity not only fails to stimulate growth, but effectively passes that debt down to the working classes.
2014: Latvia Enters the Euro Zone in 2014
Latvia entered the euro zone in 2014.
February 2015: Stiglitz on the Repeated Failure of Austerity in February 2015
On 3 February 2015, Joseph Stiglitz wrote that austerity had failed repeatedly from its early use under US president Herbert Hoover, which turned the stock-market crash into the Great Depression, to the IMF programs imposed on East Asia and Latin America in recent decades.
2015: Study Blames Austerity for 30,000 Deaths in 2015
Austerity has been blamed for at least 120,000 deaths between 2010 and 2017 in the UK, with one study putting it at 130,000 and another at 30,000 in 2015 alone.
2015: Electoral Impact of Austerity Measures
Between 1980 and 2015, a study by Gabriel et al., analyzing elections in 124 European regions from eight countries found that fiscal consolidations increased the vote share of extreme parties, lowered voter turnout, and heightened political fragmentation. Notably, after the European debt crisis, a 1% reduction in regional public spending resulted in an approximate 3 percentage point rise in the vote share of extreme parties in 2015.
November 2017: Study Linking Austerity to Deaths Published in The BMJ
A study published in The BMJ in November 2017 linked the Conservative government's austerity program to approximately 120,000 deaths since 2010; however, this was disputed.
2017: Austerity Blamed for Deaths in the UK Between 2010 and 2017
Austerity has been blamed for at least 120,000 deaths between 2010 and 2017 in the UK, with one study putting it at 130,000 and another at 30,000 in 2015 alone.
2017: Greek Debt-to-GDP Ratio at 179%
By 2017, the Greek government debt had increased to €318 billion since 2009, but the debt-to-GDP ratio had risen dramatically to 179% mostly due to the severe GDP drop during the handling of the crisis. Unemployment remained at 22% in 2017.
2017: Hollande's Promise to Eliminate France's Budget Deficit by 2017
François Hollande promised to eliminate France's budget deficit by 2017 by cancelling recently enacted tax cuts and exemptions for the wealthy, raising the top tax bracket rate to 75% on incomes over one million euros, restoring the retirement age to 60 with a full pension for those who have worked 42 years, restoring 60,000 jobs recently cut from public education, regulating rent increases, and building additional public housing for the poor.
October 2018: Theresa May Claims "Austerity is over"
In October 2018, Theresa May claimed that "Austerity is over". This statement was met with immediate criticism regarding its accuracy, especially considering the potential economic downturn related to Brexit, in October 2018.
2018: Economists Argue Spending Cuts Better for Deficit Reduction in 2018
In 2018, economists Alberto Alesina, Carlo A. Favero and Francesco Giavazzi argued that deficit reduction policies based on spending cuts typically have almost no effect on output, and hence form a better route to achieving a reduction in the debt-to-GDP ratio than raising taxes.
2020: Austerity and Default Premium
According to a 2020 study, austerity does not reduce the default premium in situations of severe fiscal stress; instead, it increases it. However, in situations of low fiscal stress, austerity does reduce the default premium, as of 2020.
2021: Austerity Measures Impact on European Governments in 2021
A 2021 study found that incumbent European governments that implemented austerity measures in the Great Recession lost support in opinion polls.
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