Debt, deficits and fiscal arithmetic

Fiscal austerity – defined as the reduction in the structural (primary) budget deficit – might be politically popular, but is it necessary from an economic perspective?

I ask this because the current Conservative government expects to eliminate the budget deficit by the middle of the next decade. So, the deficit reduction programme, which has been in place since 2010, will continue into the 2020’s. But should it? Are balanced budgets necessary to achieve sustainability in the public finances?

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