The government’s initial response to the downturn, including assistance to banks and businesses and a modest fiscal stimulus, provided material support to activity. Further significant fiscal loosening is planned but it may be counterproductive if it comes just as the recovery gets underway. While some consolidation measures have been announced, a coherent plan for a substantial fiscal consolidation should be articulated as soon possible, and put in place once the recovery is on a firm footing. The forthcoming wage negotiations should align outcomes more closely to productivity within firms.
©OECD Observer 2010