Yesterday, Stephen Harper urged his fellow politicians at the G8 summit in Italy not to spend any more money until the first round of stimulus is done working. So, did his plea resonate with his cohorts? Not exactly.
While there was no explicit declaration that the G8 nations will, or should, spend more, there wasn’t anything close to a definitive statement that the countries will hold back additional stimulus.
Here’s what the declaration said, with the important parts bolded:
We note some signs of stabilisation in our economies and we believe that the turnaround will be reinforced as our measures reach their full effect on economic activity and contribute to improving confidence and expectations. However the economic situation remains uncertainand significant risks remain to economic and financial stability. We will take, individually and collectively, the necessary steps to return the global economy to a strong, stable and sustainable growth path, including continuing to provide macroeconomic stimulusconsistent with price stability and medium-term fiscal sustainability, and addressing liquidity and capital needs of banks and taking all necessary actions to ensure the soundness of systemically important institutions.
The G8 nations are saying two things. The first is that they’re committed to seeing the first round of stimulus spending through to the end. And the second is that they’ll spend more money if they need to. Of course, it’s the U.S., Britain and Japan who will be the ones to spend more money, while Canada, Russia and Germany have said that their original rescue package will be the only bailout their countries will get.
Whether or not you think that more spending is the right way to go, we can all agree that the G8 countries need to start developing an exit strategy. Fortunately, the nations at the summit want to figure a way out of this mess too.
Point 13 of their deceleration states:
We agreed on the need to prepare appropriate strategies for unwinding the extraordinary policy measures taken to respond to the crisis once the recovery is assured. These exit strategies will vary from country to country depending on domestic economic conditions and public finances, and must ensure a sustainable recovery over the long term. We welcome the analytical work of the IMF which will assist us with this process.
Clearly, there’s still a long road ahead before the G8 nations can curb spending and pay down their deficits, but at least talking about turning on that light at the end of the tunnel.