Fiscal Consolidation

In the midst of jittery financial markets, and global economic doom and gloom, it's easy to become pessimistic. Perhaps too much so; amid what seems like a steady drum beat of bad news, one can lose sight of what has been achieved over the last couple of years.

The global economy has entered a dangerous new phase. The recovery has weakened considerably, and downside risks have increased sharply. Strong policies are urgently needed to improve the outlook and reduce risks.

The IMF chief gave a speech in New York City today that sets out how the IMF can help countries tackle this troika of challenges to the global economy...

Countries are starting the climb the fiscal adjustment mountain, cutting back government deficits and debt levels, but according to our analysis, current plans often aren't enough to get countries where they need and want to go.

The need for careful design of economic policies at the national level, and coordination at the global level, may be as important today as they were at the peak of the crisis two years ago.

As we said in the just-published Fiscal Monitor update, fiscal policy this year in some leading advanced economies is shaping up to be quite different from what was expected just last November.

Europe's sovereign debt crisis, fiscal challenges in advanced economies, concerns about overheating in emerging market countries, and the impact of rising food prices. These were the hot topics this year in Davos.

In emerging markets, policymakers must act now to avoid future crises. It is important to maintain the appropriate mix of macroeconomic and prudential financial policies to deal with the challenges posed by capital inflows.

The world economic recovery continues. But it remains a two-speed recovery: slow in advanced countries, and much faster in emerging and developing economies.

The crisis has forced economists and policy makers to go back to their drawing boards. Where did they go wrong, and what implications does the crisis have for both macroeconomic theory and macroeconomic policy making?

Achieving a "strong, balanced, and sustained world recovery"--to quote from the goal set in Pittsburgh by the G-20--was never going to be easy. It req...

How Europe deals with fiscal and financial problems, how advanced countries proceed with fiscal consolidation, and how emerging countries rebalance their economies going forward will determine if we see recovery or stagnation.

While the IMF and the labor movement might have some differing views, our goals are ultimately the same -- standing against narrow domestic interests, against nationalism, against war. And standing for better living standards for all, and for peace.

Achieving strong, sustained and balanced growth will not be easy. It will require fiscal consolidation in advanced countries, exchange rate adjustments, and a rebalancing of demand across the world.