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. (more…)
Filed under: Economic Crisis, Fiscal policy, International Monetary Fund, Public debt | Tagged: bank recapitalization, cyclically adjusted balance, debt sustainability, fiscal adjustment, fiscal consolidation, Fiscal Monitor, fiscal sustainability, government debt, interest rate-growth differential, medium-term fiscal consolidation, primary budget balance, public debt, sovereign risks | 1 Comment »