Friday, June 4, 2010

G20: Germany To Start Withdrawing Stimulus

The G20 finance ministers are meeting in South Korea and do not have good news to tell. A senior German official said Germany would announce it would start unwinding its anti-crisis stimulus outlays from 2011, this under pressure from fiscally conservative voters to cut its deficit. This would represents a very bad scenario for those believeing in a global recovery.

French Finance Minister Christine Lagarde says "the trick for the G20 was to staunch red ink in their public finances without squeezing the life out of the nascent recovery". "We spoke a lot about growth and the compatibility of this growth with necessary budgetary consolidation, especially in developed countries and not only in Europe,"

Reuters reports that the U.S. Washington is pressing Germany not to undermine aggregate demand in the euro zone by ending its pro-growth policies prematurely, but it looks like Germany is having none of it.

The only optimistic note came from Timothy Geithner, whose deficit is nothign to write home about, yet he said: "The world economy came into this period of concern about Europe with stronger underlying momentum and growth than many people expected, and we're in a much stronger position to get through this," (!)

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