Cuts are not enough

Budget cuts — national and international — are the main focus of media attention this week. We look at comments on austerity measures from Britain as well as from the G20 nations.

More reforms, please

Budget cuts are all well and good, but The Economist believes they are not the answer to the financial crisis.

… First, most rich-country governments are being insufficiently bold about reforms, such as raising the statutory retirement age, which improve public finances in the medium term without denting demand now. Second, proponents of fiscal austerity are putting disproportionate weight on budget discipline as a solution to the rich world’s ills, underplaying the importance of structural, supply-side measures. In Europe regulatory reform is essential to improve growth prospects in prudent and profligate countries alike: Germany needs to boost its under-developed service sector, for example; Spain must make it easier to fire its civil servants. …

More debate, please

The Guardian says that Britain’s new Conservative government is too ready to implement budget cuts without considering the consequences.

… Around a quarter of the national workforce is employed by the public sector. But, by extension, much private enterprise relies on contracts from public bodies or on public servants spending their wages on goods and services. The two sectors are mutually dependent. Meanwhile, the rest of Europe — our main trading partner — is also emerging tentatively from the recession and implementing austerity measures. Who, then, will buy our exports? And where will domestic demand come from when government no longer subsidises jobs? …