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The world cannot borrow its way out of the worst global financial and
economic crisis in more than half a century - it does well to recognize that
fact before it is too late.
By agreeing on the need for fiscal consolidation at the fourth Group of 20
(G20) summit in Toronto, global leaders have plumbed ahead with a determination
unseen of late to end the rapid build-up of public debt.
Policymakers must face up to fiscal challenges sooner, or else they risk
leaving unaccomplished the necessary, though painful, fiscal adjustments needed
to restore their nations' long-term productivity and competitiveness.
Swift implementation of unprecedented stimulus programs in the world's
biggest economies have so far successfully prevented a depression, yet it also
added trillions of dollars to their national debt. The fragility of the current
global recovery as well as differing national circumstances have prompted G20
leaders to acknowledge that synchronized fiscal adjustment could adversely
impact ongoing economic recovery.
However, to square the circle of growth and fiscal stability, it is
imperative for those countries facing serious fiscal challenges to accelerate
the pace of consolidation.
The G20 summit endorsed a goal for advanced economies to cut government
deficits in half by 2013 and stabilize the ratio of public debt to gross
domestic product by 2016.
Unlike expensive stimulus programs that G20 countries adopted at previous
meetings, the fiscal reform push will be far more difficult to devise and
politically hard to execute at home. Yet, fiscal sustainability is essential to
any lasting recovery. Policymakers should do their utmost to promote fiscal
consolidation, which entails short-term pain for long-term gain.
A "spirit of unity", as President Hu Jintao urged, on the part of world
leaders is not only needed to shake off the impact of the global financial
crisis, but also necessary in debt-ridden states so as to enable its citizens to
bear the burden of deficit reduction as equitably as possible. |
