In the fall of 2008, the world was confronted with the worst global economic crisis since the Great Depression of the 1930s – and the world came together to overcome it. Strong and co-ordinated actions restarted an international financial system that had seized up and put the global economy on a fragile road to recovery.
Events in the summer of 2011 have made it clear that global economic challenges are by no means behind us. What started as a sovereign debt crisis in smaller countries in Europe has now spread, causing extreme stress in the European financial sector and threatening global growth. Unfortunately, this time, the policy response to our shared challenges has not been as strong and co-ordinated as it needs to be. This slow response has resulted in missed opportunities, with each missed opportunity increasing the cost and difficulty of resolving the crisis.
We cannot afford any more missed opportunities.
To be clear, this crisis could have been contained. Instead, it grew. The good news is that this crisis can still be contained and reversed. The bad news is that, unless decisive action is urgently taken, our nations will once again be forced to respond to a full-blown global recession, albeit this time without the full arsenal of policy weapons at our disposal.
Both Europe and the G20 have important roles to play in restoring market confidence and protecting the fragile global recovery.
In Canada's view, Europe must:
• Take immediate and decisive action to resolve sovereign debt and banking system issues. This action must be sufficient to overwhelm the problem and restore markets' confidence.
• Carry out commitments to increase the flexibility of the European Financial Stability Facility and to maximize its impact as quickly as possible.
• Implement plans for debt and deficit reduction that are clear and credible.
At the same time, the G20 has a role to play through:
• Development of the Global Framework for Strong, Sustainable and Balanced Growth.
• Clear and concrete medium-term debt and deficit reduction plans – the commitments G20 nations made in Toronto last year – to put public finances on a credible and sustainable track.
• Meaningful action to increase exchange-rate flexibility.
• An unequivocal commitment to the full and timely implementation of the financial-sector reform agenda agreed to in previous summits.
• A continued commitment to resist trade protectionist measures, and to open trade and investment by advancing the multilateral trade agenda.
The choices that must be made in Europe and elsewhere are not easy. Yet, if not made, we will do a great disservice to all nations. A slow response to the recent crisis has allowed it to spread, but political will, decisiveness and a clear plan can resolve it, if we act now.
In Canada, our government has taken these challenges seriously. We have backed our words with strong action. We have a prudent, medium-term plan to return our budget to balance and protect our strong public finances. We will meet G20 deficit and debt targets well ahead of schedule. Yet, we also are implementing a pro-jobs and growth agenda that is focused on promoting investment, hiring and the retention of workers affected by the global economic downturn. In short, we have sought to strike the right balance between supporting jobs and growth, and reducing our deficit in a responsible manner.
While the efforts made so far by the G20 are significant, more action by some is needed. Only with a clear plan will the citizens of countries in crisis accept the painful compromises they are being asked to make for their nations' future well-being.
Our challenges are great, but our will to overcome them is greater. Three years ago, we sent a clear signal to the world that the G20 was ready and willing to take the strong actions necessary to maintain future growth and stability for all. We must demonstrate that we are capable of doing so again.
Stephen Harper is Prime Minister of Canada.