The World Economy... - 25/6/2010

Fiscal Austerity Versus Stimulus In The G-20 Summit

UK’s fiscal austerity will probably dominate the Group of 20 (G-20) summit’s discussion in Canada this week. UK’s sixweek old government this week proposed the country’s biggest round of budget cuts since World War II in a move to reduce its budget deficit of as high as 11% of GDP, the largest in the G-20. Chancellor of the Exchequer, George Osborne, on 22 June proposed an emergency budget that imposed a levy on banks, raised the sales tax and slashed spending.

The plan, alongside measures proposed by the prior government, will generate £113bn (US$168bn) of deficit cuts, 15% of the £737bn budget foreseen for 2015. UK joined its counterparts in Europe to reduce its budget deficit, six weeks after the Euroland’s governments united to save Greece from default. As it stands, German on 8 June proposed to cut its budget worth more than €80bn (US$98bn) through 2014. Countries including Greece, Spain, Portugal and Italy are already introducing austerity plans as well. European policymakers were concerned that failure to address public finances now risks reviving a bond market selloff that required a bailout for Greece in May. The UK’s proposals presents a test case for G-20 policymakers, as they argue how quickly to act.

The World Economy... - 25/6/2010