Both sides will have to make an effort Creditors must accept some risk, and debtors must enhance their creditworthiness through structural fiscal adjustment and reforms that improve their growth prospects.

Fiscal adjustment is jargon what austerity is always about is the distribution of income.

At the same time, fiscal adjustment remains essential to Italy s short and long term stability.

WASHINGTON, DC When economists discuss fiscal adjustment, they typically frame it as an abstract and complex goal.

High international oil prices, delays in aid disbursements, and incomplete fiscal adjustment continued to affect inflation rates.

However, expert review teams should make every effort to make the adjustment at the levels at which the problems were identified, in order to avoid making data that do not qualify for an adjustment subject to the adjustment.

However, expert review teams should make every effort to make the adjustment at the levels at which the problems were identified, in order to avoid making data that do not qualify for an adjustment subject to the adjustment.

But, given the large adjustment needs, it is not politically feasible to do everything, including painful fiscal tightening, immediately.

Thus, the tools used to carry out fiscal adjustment should boost economic efficiency, or at least not damage it.

On the contrary, applied both individually and together, fiscal stimulus and consolidation are necessary parts of the adjustment process.

Fiscal adjustment was also necessary to limit external vulnerability and the increase of external debt in relation to GDP.

Ensuring that these expenditures rise over the medium term while fiscal adjustment also takes place is a significant challenge.

On the supply side, permanently lower output makes fiscal adjustment even more compulsory but, on the demand side, a weak private economy lacks the resilience needed to weather fiscal retrenchment.

What went wrong in Greece was not the fiscal adjustment. On the contrary, austerity was perhaps too successful (and painful).

This, in turn, could delay needed improvements in financial regulation, balance sheet repair by banks, structural economic reform, and fiscal adjustment.

Thus, restoring competitiveness, not just fiscal adjustment, is necessary to revive sustained growth. There are only three ways to accomplish this.

But while she likes to raise her voice, she acts with caution today s German fiscal adjustment is, in reality, very gradual.

A key priority for advanced economies is to continue the process of fiscal adjustment that most of them initiated this year.

Barring extreme situations, they generally underperform fiscal adjustment from the standpoint of equity, and are no better in terms of efficiency.

Moreover, political gridlock over fiscal adjustment is likely to persist, regardless of whether Barack Obama or Mitt Romney wins November s presidential election.

There are three basic approaches to resolving the banking crisis (which means resolving the fiscal adjustment, sovereign debt, and euro issues simultaneously).

Europeans, both debtors and creditors, must address the banking problem forthrightly, and simultaneously with the euro, sovereign debt, and fiscal adjustment issues.

The only counterargument is that slower fiscal adjustment would further reduce confidence and thereby defeat the purpose by resulting in lower private spending.

France is fully committed to a fiscal consolidation effort that returns it to a balanced budget by 2017.

So, even as some northern countries begin to question the austerity prescription, their southern counterparts (including southern European countries) are increasingly adopting fiscal adjustment measures.

There is now great skepticism as to the substance of any fix especially one that relies on smoke and mirrors to postpone meaningful fiscal adjustment.

Now is the moment to launch an analogous effort to reform and rationalize the political process that produces fiscal policy.

And, even on such generous terms, Greece would probably need a daunting 10 of GDP fiscal adjustment just to return to a more stable debt path.

Austerity in Europe has confirmed the International Monetary Fund s warning that overdoing fiscal consolidation weakens economic activity, undermines market confidence, and diminishes popular support for adjustment.

Bailouts from the European Stability Mechanism represent the clearest example of this, with the fiscal compact now committing signatories to tight deficit targets and structural adjustment.

Their deleveraging inhibits economic recovery. And the large fiscal adjustment necessary for Greece, Ireland, and Portugal, if not Italy and Spain, will be economically and socially disruptive.

Pro cyclical fiscal adjustment tends to encourage a short term orientation towards economic policy, which limits long term investments in infrastructure and human capital, thus constraining growth.

The main pillar of our programme is the fiscal adjustment needed to limit external vulnerability and the increase of Croatia's external debt to gross domestic product ratio.

Neglect of the private sector has left Europe in a sad quandary. On the supply side, permanently lower output makes fiscal adjustment even more compulsory but, on the demand side, a weak private economy lacks the resilience needed to weather fiscal retrenchment.

Adjustment

What does this imply for Europe s austerity debate? If foreign debt matters more than public debt, the key variable requiring adjustment is the external deficit, not the fiscal deficit.

But if there is no serious effort at fiscal consolidation, serious trouble lies ahead, both for the US and for the world economy.

France is fully committed to a fiscal consolidation effort that returns it to a balanced budget by 2017. This is not just a political commitment we have enshrined France s fiscal path in a law adopted in November.

But phasing in austerity more gradually, and thus back loading the adjustment, would have posed less risk to the economy s anemic recovery while maintaining a credible commitment to fiscal consolidation.

Indeed, just a year or two ago, expansionary fiscal contraction was all the rage, and a massive research effort went into proving its existence.

Automatic Adjustment

Manual Adjustment

Perspective Adjustment...

Perspective Adjustment

It requires a fiscal policy that focuses not only on efficiency, but also on equity particularly on fairness in sharing the burden of adjustment, and on protecting the weak and vulnerable.