Participants in the G20 meeting agreed to put growth ahead of austerity as a way to improve economic performance in the short term. Leaders converged in Moscow as part of a global effort to improve economic performance in some of the world’s top economies, many of which have faced major slowdowns in recent years.
The G20 agreed to put growth ahead of spending during the weekend meetings, and to reduce the amount of attention paid to growing budget deficits in many countries struggling with declining economic performance. Leaders at the meeting agreed that given the current circumstances, governments need to focus on job creation.
Finance ministers from the world’s largest economies met at the event, which gave nations a chance to discuss their growing economic concerns. In a statement to end the meeting, finance ministers and global bankers agreed that unemployment was ‘excessively high’ in many countries, and that recovery has been uneven.
With some countries recovering slowly and others facing further economic decline, the ‘uneven’ description is certainly accurate. Japan and the United States are both experiencing a slow yet steady economic recovery fuelled by large-scale spending from the public sector, while other countries have continued to stall.
China, once a major driver of growth, has seen its manufacturing output slow down over the past year as reduced demand from EU nations threatens the manufacturing centre’s export-driven growth. Russia, a country that has benefited from its natural resources – particularly energy exports – has also experienced sluggish growth.
Both Russia and other export-driven economies have expressed concern that an end to American quantitative easing could slow economic growth. Ben Bernanke claims that Federal Reserve quantitative easing programs, which add $85 billion to the US economy every month, could come to an end in the next twelve months.Read more
Greece will soon receive another bailout from international lenders, the country’s leaders claim. The Greek government is in talks with lenders from other Eurozone countries over whether the struggling Southern European nation will receive any more bailout money from EU lenders.
The struggling economy is in the midst of a severe austerity program that will see thousands of public sector jobs cut in an effort to save money. The country’s initial job cuts will be the reduction of 4,000 civil service positions that are planned to be removed in the coming months.
Greece has struggled to balance its budget over the past two years, with the country facing a 6.6 billion euro debt to be paid by mid-August. The government’s job losses are part of the country’s agreement with IMF financiers, who have asked that Greece reduce its public spending to repay the loans.
The austerity measures, despite being important for Greece’s long-term stability, are proving immensely unpopular with the population. Anti-government protests by the Greek public have become increasingly common over the past year as many families face the prospect of losing income earners.
The Greek government also needs to redeploy 25,000 civil servants as part of its EU financing deal. The civil servants include over 2,000 teachers and 3,500 police, all of whom are to join the national forces. Despite Greece’s progress, the IMF has made it clear that Greece will need to implement its job cuts shortly to secure its deal.
The financing deal is one of several that Greece will have to secure in order to return to a level of financial stability that the public – and the EU – is comfortable with. The country may need to make further job cuts in the future in order to reduce its public spending and repay its IMF bailout loans.Read more
Portugal’s government turmoil could lead to another European economic crisis as share prices tumbled following the resignation of two high-level ministers. Shares on the PSI 20, Portugal’s primary index, dropped by almost 7 percent as two of the government’s senior ministers announced that they would be resigning.
Anibal Cavaco Silva has planned several emergency meetings aimed at resolving the ongoing political turbulence and return stability to Portugal’s government. Many of Portugal’s top political commentators believe that the high-profile resignations may be the end of the current government, led by Prime Minister Pedro Passos Coelho.
Portugal has been one of Europe’s hardest-hit economies, with unemployment in the Southern European country growing substantially over the past decade. The current Portuguese government has introduced a series of austerity programs to bring the country’s budget back to a balanced and sustainable level.
It’s also attempted to tackle the country’s growing financial decay through a bailout program worth more than 78 billion euros. Portugal has been the target of rhetoric in Brussels, with several EU officials claiming that the country’s current situation is damaging to the Eurozone as a whole, particularly in the short term.
Portugal’s government is made up of a two-party coalition. One of the ministers to resign was Paulo Portas, the leader of the CDS-PP party. The other official to resign was Vitor Gaspar, the government’s former Finance Minister. The resignations are surprising given the relative stability of Portugal’s centre-right government.
Economic commentators have expressed concern that the country’s political crisis could interfere with important economic reforms. Portugal’s justice minister, Paula Teixeira da Cruz, claims that the country’s economy is beginning to recover due to the government’s programs, and that a change in policy could be ‘disastrous.’
International analysts, including Barclays Capital, believe that the political shuffle is likely to affect Portugal’s bond markets, but will not spread to other countries in the Eurozone.Read more
Chancellor George Osborne has confirmed that £11.5 billion in spending cuts will go into effect within the next three years. The Chancellor reached a compromise with a range of government departments over their operating budgets that will see a large decrease in government spending over the next three years.
Spending cuts will begin in 2015 and will target several government departments in an effort to spread the effects of the reduced budgets. The Chancellor’s 2015 budget, which was outlined in a Spending Review, was completed last night after close to a month spent negotiating with government departments and economic groups.
Mr Osborne’s budget has come under scrutiny from a variety of leaders in the public sector, including Defence Secretary Philip Hammond, who claimed that the cuts may affect the country’s defence forces. Troop numbers have been cut twice recently due to the government’s austerity programmes, but will not be reduced further.
The Chancellor commented that the defence department had been the ‘biggest and most difficult challenge’ of the new budget, and that Mr Hammond will need to take a tough approach regarding the Ministry of Defence’s size. The new budget includes new funds dedicated to fighting cyber terrorism and other online military attacks.
Public spending has remained fairly high despite serious budget cuts made in recent years. The amount of money borrowed for public projects has also remained higher-than-normal despite increases in tax rates for many Britons. Economists believe that the new budget cuts could go some way towards decreasing the national deficit.
Osborne commented that the nation was ‘out of intensive care’ and that future fiscal policy would be aimed at promoting growth and limiting spending. He added that an economic relapse could occur if the government moved away from its spending cuts and returned to borrowing money for large-scale public spending.Read more
The world’s largest economy was criticised by the International Monetary Fund due to its slow private sector growth and its $85 billion public spending cuts. The IMF is one of several organisations to criticise the country’s approach to reducing its public sector spending, which involves uniform budget caps across several departments.
The United States plans to reduce public sector spending by almost $1 trillion over the next ten years using blanket budget cuts referred to as a ‘sequester budget.’ The cuts will affect a wide variety of government departments, and have been criticised by the IMF and other groups due to their lack of targeted budget reduction.
The IMF contends that the United States government should focus its budget cuts on government departments that produce little immediate job growth. Putting the cuts on hold, the IMF claims, could produce a 3 percent growth rate for the US this year – a significantly higher figure than the 1.9 percent growth the organisation predicts.
Current budget cuts planned by the United States reduce spending evenly from a wide range of government departments. The IMF claims that budget cuts should focus on reducing pension and healthcare spending, while increasing the amount spent on major infrastructure projects and education.
The organisation claims that reducing spending across the board will limit medium-term economic growth, as departments responsible for large infrastructure projects struggle to deal with reduced spending abilities. Despite its criticisms, the IFM gave the Federal Reserve a positive review for its continued quantitative easing policies.
The IMF has forecast growth of 1.9 percent for the United States during 2013, and a growth rate of 2.7 percent in 2014. The group recommends the United States slow its austerity efforts and instead focus on making slower, reasonable cuts to public services that will not contribute to short and medium-term economic recovery.Read more
The population in the UK is ageing and as a result, cost of care is rising. The OBR states that greater spending cuts will need to take place if the national debt is to be kept under control for the long term. The independent economic forecast group further states that at the rate Britons are ageing it will be impossible to keep up with the costs, in their words, “clearly unsustainable.”
They contend that if the government were able to save as much as £123 billion during the next seven years, the government would still need to raise taxes or increase spending cuts which would be equal to a little over 1pc of the GDP. In today’s market, that is equal to about £17 billion annually. It would take at least this amount to bring the national debt back to where it was before the debt crisis.
However, if these figures seem grim, consider the fact that the public sector net debt could decline from 74% of the GDP which is forecast for the 2016-17 fiscal year to perhaps 57pc in the middle part of the 2020’s and then by the early part of the 2060’s the public sector debt will reach a level unprecedented to 89pc of the GDP. As bad as that sounds, this is a far cry better than what had been projected last year where analysts said the public sector debt at that time would be as high as 107pc of the GDP.
Last year in his autumn statement, Osborne said that he believed austerity would need to be held over at least another two years but in reality, it will be several decades before the UK can lift itself out of debt.Read more
During this bank holiday weekend, motorists are finding pleasant surprises at the pumps. After months on end of steadily rising prices, this is good news indeed and motorists are lining up to fill their tanks before prices start to rise again, which they fully expect to happen soon.Read more
With the recent news that the UK is indeed in the grips of a double dip recession, experts say that instead of focusing on austerity, we should be ‘buying British.’ Since this is the first the nation has faced in four decades, economists believe many people alive today don’t remember what it took to work our way out of those bleak financial times of the past.Read more
Banking April 27, 2012
Yet another bank is at the centre of controversy as it announces 3,167 employees are to be cut from the workforce. HSBC is on the receiving end of the wrath of Unite and other unions throughout the UK. The bank’s chief executive, Stuart Gulliver, is the target of most of their anger.Read more
Member nations of the European Union had wanted a 5% increase in budgets for the coming year but other EU states, including the UK, argued that this was a bit much especially under these times of austerity measures around the region. This amount appeared unrealistic, according to sources cited by the BBC, and finally a 2% increase in the 2012 EU budget was agreed upon.Read more