Sowula, Jakub; Seeleib-Kaiser, Martin (2023). The perceived dilemma between debt reduction and a fair society: saving for a rainy day without increasing poverty? In: Greve, Bent (ed.) Welfare States in a Turbulent Era (pp. 48-70). Edward Elgar 10.4337/9781803926841

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Reducing debts and deficits in economic stable times has become the overarching policy goal after the financial and sovereign debt crisis. In an era of low growth, fiscal consolidation is seen as the central key to achieving the latter, however, often resulting in a trade-off between equality and efficiency. In this article, we study whether it is possible to achieve the seemingly impossible: pursuing successful fiscal consolidation without sharp increases in poverty. For this, we apply a fuzzy-set qualitative comparative analysis (fsQCA) among the countries of the European Economic Area (EEA) plus Switzerland between 1994 and 2019, excluding “the rainy day” (2008-2013) of the financial and the sovereign debt crisis. The absence of sluggish economic growth is identified as a necessary condition for reaching the outcome. Moreover, we find multiple sufficient paths, including such that are not export-driven but rely on domestic strategies (via high employment and a strong left) to achieve fair fiscal consolidation. However, to what extent such a strategy is still possible in the future remains an open question.

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