G20 leaders promise to cut budget deficit in half within three years
G20 leaders have today released a statement confirming they are looking to reduce the budget deficits of the world's richest nations by at least 50% over the next three years. This is exactly what investment markets are looking for but there is concern that we have seen promises like this before only to fall by the wayside. So can we believe what we are hearing today?
Aside from the fact that there is a definite need to reduce budget deficits around the world there is also a need to appreciate that reducing these budgets too quickly could stifle short to medium term economic growth. This would place more pressure on economies, widen budget deficits and lead us back to square one again. Finding a balance between reducing government budgets around the world and also introducing the financial support required to encourage economic growth is a battle which needs to be won.
The basis of today's G20 meeting is purely and simply to give the right signals to the investment markets and to try and allay the fears of investors. Whether or not this will be enough remains to be seen because talk is cheap and action has been much slower in the past.
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