The highly anticipated gathering of G20 leaders in Toronto this month is fast becoming the Austerity Summit.
As Europe’s debt woes roil financial markets day after day – and amid widening concerns that the crisis could send the still fragile global economy into a new tailspin – world leaders are shifting their focus to controlling ballooning deficits rung up by governments to fight the recession.
As a result, such key issues as financial reform, climate change and poverty in the developing world could get shorter shrift when the leaders meet in the Ontario capital on June 26 and 27. Further stimulus spending will not even be on the table.
“It’s the No. 1 issue of the G20,” Finance Minister Jim Flaherty said Monday, of the need for countries to find ways to deal with their spending and debt problems. “What’s going on in Europe is not an academic exercise.”
Governments across Europe are already adopting a new mantra of austerity and are pushing ahead with plans to either slash spending or raise taxes, or both, in an effort to get their battered fiscal houses in order.
There is a risk that pulling the plug on unprecedented stimulus measures launched in the wake of the global credit crunch in 2008 will send their economies reeling again. But this is outweighed by a stark loss of investor confidence – and the growing threat of costly credit downgrades – that has sent bonds and equities reeling and driven the euro to fresh lows against other major currencies.
British Prime Minister David Cameron warned Britons Monday that they face heavy cuts in public spending and years of tough budgets, as the new coalition government wrestles with deteriorating public finances. “The overall scale of the problem is even worse than we thought,” Mr. Cameron said in a speech north of London. “How we deal with these things will affect our economy, our society, indeed our whole way of life.”
