Spending in an Austere Era

This chapter provides an economic background for fiscal adjustments and drivers of spending in an austere time. It begins with national snapshots of each country's fiscal–financial condition when the 2008 crisis first hit, weaving in, where appropriate, an historical overview. The analysis includes assessment of factors such as domestic economic imbalances, financial and housing bubbles, and exposure to international economic downturn. It also delineates national and cross-national banking-sector dynamics as identified in measures like stimulus and guarantees (credit underwriting, insurance support, and the like); bailouts (asset taking, nationalization); write-offs and taxpayer-borne risks; partnerships and privatization; and international pressures (from supranational institutions and investors). These varied responses involved mobilizing, creating or reconfiguring public sector institutions, insulating the banking sector from a crisis of its own making, and blaming the state for debt and deficits that will be used to insinuate public sector culpability.