Deal on debt must be decisive

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Here's why Prime Minister Stephen Harper's Group of 20 summit must come up with a tangible promise to deal with sovereign debt.

Spanish Prime Minister Jose Luis Rodriguez Zapetero's €15-billion austerity program passed by one vote Thursday, aided by 13 abstentions.

As margins go, they don't get much thinner. The problem for the socialist Mr. Zapetero, who lacks a majority in parliament, is that this is only the beginning. He must now rally support for a 2011 budget that promises to be even more severe as it will contain the bulk of the measures needed to reach his goal of narrowing Spain's budget deficit to 3 per cent of gross domestic product by 2013 from the current shortfall of 11.2 per cent of GDP. For now, the odds are against Mr. Zapetero. An opposition party that abstained from Thursday's vote says it will oppose the budget. Another opposition bloc, the Popular Party, was so against Thursday's bill that it brought one of its members to the parliament in an ambulance to symbolize how adamantly it will resist the government's austerity plans.

It appears Mr. Zapetero, who is obliged to hold an election by the spring of 2012, will need all the help he can get. This is where his friends in the G20 come in. (Spain isn't an official member of the G20, but Mr. Zapetero has been invited to previous summits and will attend the Toronto meeting. He also holds the rotating presidency of the European Union until June.)

The critics of the G20 process tend to forget its usefulness as a shield from the arrows slung by governments' political opponents. Mr. Harper and Finance Minister Jim Flaherty know this well. Back in 2008, Mr. Flaherty had vowed that he would never oversee a budget deficit and Mr. Harper was slow to acknowledge that Canada faced a serious risk of recession. Given the Conservative government's loose grip on power at the time, those were natural positions to take. When the Harper government was forced to acknowledge a recession and go into deficit, the G20 commitment to spend 2 per cent of gross domestic product on fiscal stimulus proved a useful shield against charges of hypocrisy.

Mr. Zapetero isn't the only leader of a major economy facing an election over the next couple of years. The prospect of cutting the salaries of the members of powerful public sector unions or trimming benefit programs is hardly the kind of thing leaders want to be doing at the same time they are trying to retain their jobs. Some political cover from the G20 could help. If everyone promises to reduce their deficits to, say, 3 per cent of GDP by 2013, then politicians such as Mr. Zapetero might find it easier to explain spending cuts to their electorates than if they were acting alone.

Mr. Harper reaffirmed Thursday that sovereign debt and the global economy will be the key issues at the summit, along with overhauling financial regulation. "With the fragile global economic recovery hanging in the balance, it is crucial that we build consensus at the summit on reform of the financial sector, control of sovereign debt and the framework for strong, sustainable and balance growth over the long term," Mr. Harper said in his introduction of Mexican President Felipe Calderon, who spoke to the Canadian Parliament.

For a chair who wants to keep the agenda manageable, those are the right themes. For a chair who wants his summit to go down as a success, those themes are going to have to become more concrete. To understand why, Mr. Harper, who now has a comfortable lead in opinion polls, need only go back to late 2008 and early 2009. Would he being doing so well now if all he had then to support his decision to reverse his party's stand on deficits was a vague commitment by the G20 to spend some money fighting the recession? The pledge to spend 2 per cent of GDP on fiscal stimulus was more than a mathematical calculation by the economists at the International Monetary Fund. It was a political one too. Voters are more willing to accept concrete commitments than fuzzy ones.