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The joint statement released by the finance ministers and central bank governors from G20 countries once again portrays a world struggling with slow growth.
The recommended policy response is the usual combination of monetary policy, fiscal policy and structural reforms. However, what makes the Sunday statement interesting is the special focus on fiscal policy rather than monetary policy. It says that monetary policy cannot lead to balanced growth. In contrast, there is an emphasis on fiscal policy as “equally important to support our common growth objectives”.
It is too early to say whether this constitutes a move away from the austerity that many rich countries have pushed through in response to the rapid deterioration in public finances following the stimulus after 2008. It is also too much to expect the sort of coordinated fiscal bazooka fired in 2009 by the G20. But changes in fiscal policy will be worth watching closely in the coming months.