G20 leaders Sunday were singing a new tune — “growth friendly fiscal consolidation” — which in a few short weeks of behind the scenes haggling has become the slogan of the day.
The term first seems to have emerged earlier this year in Washington, as governments undertook a delicate diplomatic dance to unite opposing views on how to shore up global economic recovery.
In April the International Monetary Fund (IMF) published its forecasts for world growth, and warned major economies were shouldering unprecedented levels of public debt which could derail the world economy.
“The challenge is to devise, like in many other advanced economies, a medium-term fiscal plan that anchors expectations and targets measures that are growth friendly,” said IMF economist Joerg Decressin.
The term then popped up again in a comment by US Treasury Secretary Timothy Geithner on June 2.
“As the IMF says, we want those fiscal reforms to happen in a way that’s growth friendly,” he said, as he headed to G20 finance ministers talks in South Korea.
Putting together the two words has two benefits: it sounds reassuring at a key moment when European debt levels are stirring fears, and it stresses the need for growth as the US puts the accent on stimulus rather than austerity.
The IMF took up the theme again the day after. “Countries will need to work on growth friendly fiscal reforms,” said spokesman David Hawley.
“It is very important that the twin pillars of fiscal consolidation and growth be addressed together,” he added.
After the G20 ministers meeting in Busan, they issued a statement highlighting “the need for our countries to put in place credible, growth-friendly measures, to deliver fiscal sustainability, differentiated for and tailored to national circumstances.”
On June 18, Chinese Deputy Finance Minister Zhu Guangyao adopted the phrase. “The consolidation should be conducive to healthy economic development — that is, growth-friendly fiscal consolidation,” he said.
He was followed on June 23 by South African Finance Minister Pravin Gordhan, and then in the days leading up to the G20 summit in Toronto the idea was promoted by Canadian officials in media briefings.
Then it was just a question of getting everyone on board, especially the austere Europeans accused of risking a fragile economic recovery.
German Chancellor Angela Merkel was delighted Sunday as the G20 was set to formalize the expression in its final communique, acknowledging it was the result of the discussions they had had.
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