## Fiscal Glass is Half Full: Some Reasons for Optimism _IMF Blog, September 21, 2011_ ## Source details **Canonical URL:** [Fiscal Glass is Half Full: Some Reasons for Optimism](https://www.imf.org/en/blogs/articles/2011/09/21/fiscal-glass-is-half-full-some-reasons-for-optimism) ## Other formats - [Markdown version](/en/blogs/articles/2011/09/21/fiscal-glass-is-half-full-some-reasons-for-optimism/index.md) - [Structured JSON version](/en/blogs/articles/2011/09/21/fiscal-glass-is-half-full-some-reasons-for-optimism/index.json) - [Bundle manifest](/en/blogs/articles/2011/09/21/fiscal-glass-is-half-full-some-reasons-for-optimism/bundle-manifest.json) ## Bibliographic details - Authors: Carlo Cottarelli - Published: September 21, 2011 --- ### Overview - Author: Carlo Cottarelli - Date: September 21, 2011 - Main message: Despite high public debt and fiscal deficits in many advanced economies, important progress has been made in fiscal adjustment over the last couple of years; nevertheless, significant challenges remain to stabilize and reduce public debt without undermining fragile economic recoveries. ### Fiscal progress and projections - For most countries, government deficits have fallen substantially—by 2¼ percentage points of GDP on average compared to two years ago. - The fiscal outlook in most countries is stronger than projected two years ago. - For the five largest European countries: - Previous projections (from two years ago) showed larger increases in public debt to GDP ratios for the period 2012 through 2014 (described as shown in gray). - Current projections show smaller increases in debt over that same period, and in some cases debt is now expected to fall (described as shown in blue). - This improvement reflects commitments by these countries to reduce their deficits over an extended period. ### Europe: market perceptions, communications, and political implementation - Observed gap: Europe’s financial markets appear to think the region is not doing enough on the fiscal front despite measurable progress. - Possible causes: - Communications: The Euro area has "a cacophony of voices" with 17 policymakers expressing views, creating uncertainty when markets seek a clear voice and message. - Implementation: Summer agreements by European leaders give flexibility to address problems early, but these agreements still need to be implemented. Prompt implementation would send a clear political signal that Euro area members will continue to do whatever it takes to preserve confidence. ### Policy challenges and country-specific approaches - Dual objective for fiscal policymakers: - Commit to a plan that will stabilize and then bring down public debt so the public sector is not a source of instability. - Ensure fiscal tightening does not itself become a source of instability by undermining the economic recovery, which is at a delicate moment. - Country circumstances determine the appropriate mix of short- and long-term adjustment: - Some countries will have no choice but to tighten significantly in the short term because of market conditions, while minimizing the growth fallout. - Others with easier financing conditions may have scope for a more moderate pace of short-term adjustment, especially if their medium-term commitment is seen as highly credible. ### United States: example and policy elements - A credible program to reduce debt and deficits over the medium term could free up space for a short-term stance more attuned to the economic cycle. - The American Jobs Act proposed by President Obama can play an important role in supporting growth and employment if embedded in an appropriate medium-term framework to bring down public debt. - Given the size of the adjustment needed in the United States: - The medium-term framework will need to involve an increase in tax revenues. - It will be important to ensure that the burden of increased tax revenues is distributed equitably across society. - Reform of entitlements—both health care and social security—to contain the growth of spending on these items is also needed. - Any debt reduction package must be the product of a broad political consensus to give financial markets confidence that it will be adhered to over the long haul. ### Tone and concluding guidance - Advice to audiences: - To pessimists: do not lose sight of what has been achieved. - To optimists: do not underestimate what still needs to be done. - Metaphor: Markets seem to focus on the glass being half empty and ignore that it is also half full; take stock of progress before tackling the remaining challenges. - Related media: a video is embedded in the original content (youtube=http://www.youtube.com/watch?v=t1-Qb0jhVsA). *Source: Carlo Cottarelli, September 21, 2011.* --- ## Content in this bundle - **092111ba** - [092111ba (PDF)](/external/arabic/np/blog/2011/092111ba.pdf){rel="external" type="text/html; charset=utf-8"} - **iMFdirect 博客: 财政水杯半满：有一些乐观的理由, 2011 年 9 月 21 日** - [iMFdirect 博客: 财政水杯半满：有一些乐观的理由, 2011 年 9 月 21 日 (Markdown version)](/external/chinese/np/blog/2011/092111ac.pdf.md){rel="alternate" type="text/markdown"} - [iMFdirect 博客: 财政水杯半满：有一些乐观的理由, 2011 年 9 月 21 日 (PDF)](/external/chinese/np/blog/2011/092111ac.pdf){rel="external" type="application/pdf"} - **Бюджетный стакан наполовину полон: некоторые причины для оптимизма** - [Бюджетный стакан наполовину полон: некоторые причины для оптимизма (Markdown version)](/external/russian/np/blog/2011/092111ar.pdf.md){rel="alternate" type="text/markdown"} - [Бюджетный стакан наполовину полон: некоторые причины для оптимизма (PDF)](/external/russian/np/blog/2011/092111ar.pdf){rel="external" type="application/pdf"} --- ## References - [fiscal outlook](http://www.imf.org/external/pubs/ft/survey/so/2011/NEW092011A.htm) _Source: https://www.imf.org/en/blogs/articles/2011/09/21/fiscal-glass-is-half-full-some-reasons-for-optimism_