Shifting Gears: Where the Rubber Meets the Fiscal Road


By Carlo Cottarelli

Undertaking a sizable fiscal adjustment is a lot like driving up a tall mountain: it’s hard work, it can take a long time, and you don’t want to run out of fuel partway up the incline. Countries are starting the climb, cutting back government deficits and debt levels, but according to our analysis often current plans aren’t enough to get countries where they need and want to go.

The plans in place are large by historical standards, which brings with it difficult choices, and particular risks and uncertainties. Let me fill you in on what these are. Continue reading

The Long and the Short of It—Government Debt Plans in 2011 and Beyond


By Carlo Cottarelli

(Version in Español)

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.

The United States and Japan are delaying their earlier plans to reduce their public deficits, choosing instead to provide further support to their economies. The change in plans is even more remarkable if you look at the cyclically adjusted balance. You can see this in the charts. Some of the change in the fiscal stance with respect to our earlier projections is attributable to the somewhat better than projected fiscal results in 2010, a point to which I will return in a moment. Most of it, however, is due to additional stimulus measures introduced during the last two months. These two countries need to strengthen their fiscal adjustment credentials by detailing the measures they will adopt to lower deficits and debt over the medium term. Continue reading

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