Global markets don’t like the fact that they have been forced to digest item after item of bad news. At the end of last week, they had to contend with tepid US job figures and the realization that Hungary’s sovereign default, as a government official admitted on Friday, was a real possibility.
With their palates troubled, investors can no more digest the public sector risk they were so willing to take on a year ago. And policymakers are finally starting to diagnose what the problem could be: their own policies.
At the Group of 20 (G-20) summit in April 2009, policymakers were exuberant about using “an unprecedented and concerted fiscal expansion” to combat the Great Recession. This exuberance officially came to an end on Saturday in South Korea, when G-20 finance ministers decided to drop support for fiscal stimulus.
As this newspaper has argued before, too much fiscal stimulus can be bad for health. India’s leaders should digest the idea too.