Definition of austerity

Austerity marks a period of adverse economic conditions where the government cuts its spending or increases taxes in order to reduce its budget deficit.

Various austerity measures have been announced since the global recession in 2008 and the Eurozone crisis in 2009. [1]

Austerity in France

The French government’s 2013 budget, unveiled in 2012, piled most of the burden of its €30bn savings on big companies and the wealthy, avoiding the severe cuts imposed on the broader population in Spain, Portugal, Greece and elsewhere. [2]

As promised by François Hollande, the president, the budget largely spared the French the kinds of hefty cuts in public spending and employment, pensions and salaries imposed in other eurozone countries struggling to contain their sovereign debt.

The savings included €2.2bn in a scaled back defence budget. Another €2.5bn would be saved in 2013 by limiting the rise in state health spending to 2.7 per cent. Extra tax measures in 2012 would add another €4.4bn.

Some economists and business leaders feared that the steep tax increases and relatively modest spending curbs could undermine France’s projected annual growth path of 2 per cent a year from 2014 to 2017, when it planned to have eliminated the structural deficit. [3]

In addition, there were plans to tax earnings above €1m at 75 per cent. According to Jean-Paul Agon, chairman and chief executive of L’Oréal, one of the world’s largest cosmetics company, pointed out that France would find it "almost impossible" to hire top talent if the government went ahead with this income tax band. [4]

The UK was also facing a deficit reduction programme beginning with a freeze in child benefit in April 2011 and changes to the rate at which the top band of income tax kicks in. This interactive calendar explored the key changes:

Interactive graphic: A timetable for austerity Britain

 

Austerity in the UK

In August 2013, the FT published an indepth report that looked at the impact of cuts to welfare payments to different areas of UK. It found that cuts would hit the local economies of northern towns and cities as much as five times harder than in the Conservative heartland of Britain's south east.

George Osborne wins battle on austerity

 

 

 

 

 

 

 

 

 

 

 

Despite the hardship, UK chancellor George Osborne was able to point to a run of positive economic data in September 2013 and claim that he had won the battle on austerity.

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In depth: Austerity Europe

Leftists march in Paris against austerity

France unveils tough budget measures

L’Oréal chief hits out at 75% income tax