This chapter considers the determinants of fiscal policy outcomes during the Consolidation Years 2011–14. It disagrees with the claim that Europe is under the spell of an austerity illusion. Echoing Chapter 5, it finds that member states’ fiscal consolidation was by and large in line with domestic fiscal space. Proponents of fiscal rules would credit the strictures of the Stability and Growth Pact (SGP) or newly created debt brakes for bringing about consolidation. Yet there is no convincing evidence that these rules mattered for fiscal policy outcomes. Instead, financial market pressure mattered—this holds for the Stimulus Years and Consolidation Years alike. Market discipline is not felt equally across the EU. A prominent emerging fault line runs between program countries and those who fear the threat of market panic on the one hand, and credit countries who remain largely insulated from the vagaries of international capital markets on the other.
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