This paper analyzes the factors that determine the likelihood to initiate a fiscal adjustment, as well as the determinants of successful fiscal adjustments in a set of OECD countries. Its focus is different relative to previous studies, because it investigates the role played by labor and product market institutions. The study finds that while factors such as bad initial budgetary conditions, exchange rate depreciation, and the size and composition effects of the fiscal adjustment play an important role, institutional characteristics of the labor and product markets affect in a significant manner the decision of a government to initiate a fiscal consolidation program, and the likelihood that this program will be successful. This finding becomes particularly relevant in view of the challenges faced by many countries, which strive to achieve lasting improvements in their budgetary positions, while at the same time they have to put forward ambitious structural reforms programs to enhance their potential growth performance and to improve the functioning of the internal market.