The leaders of the world’s twenty largest economies came out of this weekend’s G20 summit with a framework intended to sustain the ongoing recovery in the short-term and to reduce government deficits and debts in the longer term.
Government deficits and debt – which directly and indirectly impact the availability and costs of a wide range of financial products including consumer mortgages, lines of credit and home equity loans – were clearly the focus of the G20 which met in Toronto over the weekend.
Under the Final Statement issued from the G20, “advanced economies have committed to fiscal plans that will at least halve deficits by 2013 and stabilize or reduce government debt-to-GDP ratios by 2016.” Other commitments include rather pro forma language obliging advanced economies currently running a deficit (read United States, but also Canada) “to boost national savings while maintaining open markets and enhancing export competitiveness.” (Of note to readers, the most obvious way to boost savings is to raise interest rates from their current near-record lows.)
The goals set out by the G20 are daunting, particularly the challenge to reduce government deficits and debt on schedule. Fortuitously, Canada was in comparatively better fiscal shape than most other G20 countries before the 2008 financial crisis and the ensuing recession. As a result Canada has a clearer path than many other countries – particularly the United States – to the stated goals for government deficit and debt reduction.
