December is a time of holiday gift-giving and strong business activity in many places.
But this year, a different idea is weighing on the minds of people in many countries: austerity.
This week, publisher Merriam-Webster released its list of top ten words of the year for two thousand ten. And “austerity” was at the top. The company made its list based on how often people looked up definitions using its online dictionary.
Merriam-Webster defines “austerity” as “enforced or extreme economy.” Greece and Ireland face huge budget deficits. This has forced severe spending cuts for those governments. And they are not alone.
When nations get into financial trouble, they may request loans from the International Monetary Fund or other donors. Donors, however, demand austerity measures such as sharp cuts in government spending and tax increases.
Michael Izza is chief executive of the Institute of Chartered Accountants in England and Wales. He says the world financial crisis pushed some governments to spend more. But not all debt problems are the same.
Economist Dev Kar says Greece got into trouble by having too many government employees, spending freely on retirement pay and misleading investors. Last spring, Greece received rescue loans of over one hundred billion dollars. But Germany agreed to help only if Greece promised tough austerity measures.
Ireland’s budget deficits grew sharply after it guaranteed the bad loans of the country’s biggest banks. In November, European officials agreed to a bailout nearly as large as the one Greece received.
But austerity measures are unpopular. Large protests have taken place not only in Greece and Ireland, but also in Britain, Portugal and Romania.
Other nations facing big deficits and slow economic growth are also seeing their borrowing costs rise. Credit rating agencies are warning about the debts of Portugal and Spain and others may follow.
In May, European leaders agreed to set aside nearly seven hundred billion dollars to help troubled countries in the area. But the chief of the International Monetary Fund, Dominique Strauss-Kahn, says a more organized approach is needed.
DOMINIQUE STRAUSS-KAHN: “Europe has to provide, the euro zone has to provide, a comprehensive solution to this problem. The piecemeal approach, one country after the other one, is not a good one.”
This could mean “austerity” will remain a top word for two thousand eleven.