Monday, June 28, 2010

G20 moves to austerity planning

G20 summit with the theme “Recovery and New Beginnings”. Surprisingly, even the name of the summit can be called into question for the developed countries. The New Beginnings may be code for fiscal austerity.

The G20 pledged to “follow through on delivering existing stimulus plans,” while acknowledging “the need…to put in place credible, properly phased and growth-friendly plans to deliver fiscal sustainability.” This has the caveat that the rules will be “tailored to national circumstances in order not to derail the recovery under way.”

Advanced economies subscribed to fiscal plans that will halve deficits by 2013 and “stabilize or reduce government debt-to-GDP ratios by 2016.” I don't know how many times G20 restrictions were made and not kept but these are interesting proposals. We are still having riots in Greece over its austerity measures. The French may strike given it was proposed that retirement will be raised to 62.

Again, this will be the test of Keynesian stimulus versus what some have called the new Hooverism.

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