Among the key issues to be discussed at the meetings of G-20 nations here is whether countries facing a crisis should focus on generating demand to revive growth or aim for fiscal consolidation to check sovereign debts.
“The issue of austerity versus growth is one of the central issues before the G-20. Most Euro zone countries have very high sovereign debts. If one country has very high sovereign debt, there is no doubt it would be told to carry out a little bit of austerity,” Planning Commission Deputy Chairman Montek Singh Ahluwalia said here.
However, since all countries have high sovereign debts, it cannot be argued coordinated austerity across the board would lead to high growth. Sill, no one is saying fiscal prudence doesn’t matter. “The issue is if you have a depressed situation globally, how can you return to fiscal consolidation? The general view is you have to do this in the medium term. Countries that are in deep trouble have to act more, and countries that are not may need to even expand. That is what global rebalancing is all about,” Ahluwalia said.
When asked whether this would be stated in the G20 communiqué, he said one would have to wait and see what the communiqué spelt out.
Asked whether Prime Minister Manmohan Singh would focus on demand-generating measures during his meeting with German Chancellor Angela Merkel, Ahluwalia said, “Europe has had enough messages.” Merkel has been insisting on austerity measures for countries like Greece, which face huge financial problems.
External Affairs Secretary Ranjan Mathai said Prime Minister Singh would also meet British Prime Minister David Cameron, Russian President Vladimir Putin and French President François Hollande on the sidelines of the G20 meetings.