This paper examines whether severe fiscal contractions can be expansionary, using the experiences of Denmark and Ireland as case studies. In the early 1980s, both countries implemented significant fiscal adjustments to address high public debt and interest rates. Denmark's fiscal contraction, which included severe budget cuts and tax increases, was accompanied by a sharp reduction in public spending and a devaluation of its currency. Despite these measures, Denmark experienced robust economic growth, with real GDP increasing by an average of 3.6% from 1983 to 1986. The paper analyzes the direct effects of fiscal and monetary policies on consumption, including changes in disposable income, wealth, and interest rates. It also explores the role of expectations about future fiscal policy, aligning with the "German view" of fiscal multipliers. The results suggest that the expansionary effects in Denmark were driven by a strong increase in wealth, particularly through asset price increases, while the contractionary effects in Ireland were more pronounced due to a lack of a significant wealth effect. The paper concludes that the experiences of Denmark and Ireland provide valuable insights into the conditions under which severe fiscal contractions can be expansionary.This paper examines whether severe fiscal contractions can be expansionary, using the experiences of Denmark and Ireland as case studies. In the early 1980s, both countries implemented significant fiscal adjustments to address high public debt and interest rates. Denmark's fiscal contraction, which included severe budget cuts and tax increases, was accompanied by a sharp reduction in public spending and a devaluation of its currency. Despite these measures, Denmark experienced robust economic growth, with real GDP increasing by an average of 3.6% from 1983 to 1986. The paper analyzes the direct effects of fiscal and monetary policies on consumption, including changes in disposable income, wealth, and interest rates. It also explores the role of expectations about future fiscal policy, aligning with the "German view" of fiscal multipliers. The results suggest that the expansionary effects in Denmark were driven by a strong increase in wealth, particularly through asset price increases, while the contractionary effects in Ireland were more pronounced due to a lack of a significant wealth effect. The paper concludes that the experiences of Denmark and Ireland provide valuable insights into the conditions under which severe fiscal contractions can be expansionary.