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Mon day, Febru ary 23, 2009

Shar ing The BurdenThe International Monetary Fund has called for a global fiscal stimulus of 2 percent of GDP. In 2009, U.S. andChinese stimulus spending is likely to exceed that target. European stimulus will be less than half thatamount. Is the burden of world economic recovery being adequately shared? If not, who needs to do more andin what fashion? And how should the global community exert peer pressure to encourage burden sharing?

-- John Maggs, NationalJournal.com

1 Response

Responded on February 23, 2009 9:04 AM

Jean Pisani-Ferr y, Director, Bru egel, and Pro fessor of Econom ics,Universit Paris-Dauphine

According to the latest International Monetary Fund forecasts

, economic contraction in 2009 is going tobe somewhat sharper than in the US. Private forecasters do not disagree. Yet in proportion of GDP, thesize of the stimulus packages put in place in Europe are at best half the size of the US recently enactedARRA stimulus, and unlike it several of them are rear-, rather than front-loaded . Calculations by DavidSaha and Jakob von Weizscker of Bruegel assess the 2009 fiscal impulse in the EU is going to be 0.9%of GDP against 2% in the US. So Europe will clearly fall short of the 2 percent of GDP advocated by the

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than in the US. US Treasury securities are in high demand worldwide and bEuropean government securities. Only the German Bund and to some extefrom a demand effect and only to a very limited extend. Other governme

demand and some are regarded with caution by investors. This means cons

What can be done? There is no easy way out. Europe will not create a federmake joint macroeconomic stimulus easier. It is not going to renounce to th

is responsible for its own debt. It needs however to act to prevent a worsenstarted to emerge, with potentially dire consequences for the regions abilitsubstantial fiscal stimulus. Discussion has started on various plans of uneqcreation of a joint debt agency to the setting up of a European equivalent ofagreements between strong and weak countries.

Once again therefore the EUs ability to deliver globally hinges on its ability

Its international partners should remind it that in the midst of a crisis of thplay its part in the global game and that it cannot afford to be obsessed by ialso need to understand where these problems are real ones and help find

Jean Pisani-Ferry is the Director of Bruegel, the Bruegel-based think tankferry[at]bruegel.org