By Nick Mann | 6 November 2012
Finance ministers and central bank governors from the Group of Twenty leading economies have vowed to set out long-term ‘credible and ambitious’ plans and targets for reducing their public debt.
In a joint statement issued last night at the end of a two-day meeting in Mexico, they committed to ensuring advanced economies’ public finances were on ‘sustainable paths’. The pledge reiterates the commitment made In Canada in 2010, which included at least halving fiscal deficits by 2013 and stabilising debt-to-gross domestic product ratios by 2016.
They also agreed to ‘identify credible and ambitious country-specific targets for the debt-to-GDP ratio beyond 2016, where these do not currently exist, accompanied by clear strategies and timetables to achieve them’. This goal should be achieved by next September’s G20 summit in Moscow.
The communiqué added that debt and deficit reduction efforts should not affect growth. ‘In light of the weak pace of global growth, they will ensure that the pace of fiscal consolidation is appropriate to support the recovery,’ it said.
‘Countries which have fiscal space will let the automatic fiscal stabilisers operate as appropriate. Those with sufficient space stand ready to support demand as needed in the short run should economic conditions deteriorate.’
The US should avoid the ‘fiscal cliff’ – the combination of spending cuts and tax increases that will kick in at the start of 2013 unless political agreement is reached on new spending plans. Instead, it should ‘carefully calibrate the pace of fiscal tightening to ensure that public finances are placed on a sustainable long-run path’.
Japan was also urged to make further progress in its medium-term fiscal consolidation. Concerns have increased over recent weeks that Japan might be facing its own ‘fiscal cliff’, as its prime minister and Parliament continue to dispute whether or not to increase its debt ceiling.
In the European Union, countries were urged to continue current reform momentum in structural, fiscal and financial fields ‘with a view to improving competitiveness and promoting financial stability’.
