The Magnificent Eight or Group of Eight (G8) which include USA, Canada, Russia, Germany, France, United Kingdom, Italy, and Japan, are joined at the G8 summit in Toronto this weekend. Later to be joined by emerging economies like China, India, Australia, Argentine, etc. at the following G20 summit. Brazil's President Silva has announced default because of floods. The participating nations are there to set the ground rules for economic growth and stability accross the major economies, following the financial crisis.
'We are poised to create the toughest financial reform since the one we created in the aftermath of the Great Depression. Early this morning the House and Senate reached an agreement on a set of Wall Street reforms, that represent ninety percent of what I proposed, when I took up this fight. Let me be clear, our economic growth and prosperity depend on a strong and robust financial sector,' US President Obama stated about the US efforts, according to BBC World.
Although German Kansler Merkel is in favour of a more restrictive regulation based on cut backs, she found much common ground among the G8 nations.
'I have made it clear that we need sustainable growth and that growth and intelligent austerity measures don't have to be contradictions,' Mrs Merkel told journalists.
British PM David Cameron agreed that different measures could compliment each other.
'I want to get the right outcome for the world economy, and that means that those countries, like our own, with budget deficits have got to move faser. Other countries with surpluses can afford to do other things,' Cameron explained to the press at the G8 summit.
The original G7 included Russia in 1997 on invitation by US President Bill Clinton, changing its name into G8. G20 or The Group of Twenty, comprises Finance Ministers and Central Bank Governors.
US Economist Paul Krugman writes about the topic for the New York Times. He calls for stimulus to the economy. On 14th June he writes:
'...But we can’t afford it, say the advocates of austerity. Why? Because we must impose pain to appease the markets.
There are three problems with this claim.
First, it assumes that markets are irrational – that they will be spooked by stimulus spending and/or encouraged by austerity even though the long-run budget implications of such spending and/or austerity are trivial.
Second, we’re talking about punishing the real economy to satisfy demands that markets are not, in fact, making. It’s truly amazing to see so many people urging immediate infliction of pain when the US government remains able to borrow at remarkably low interest rates, simply because Very Serious People believe, in their wisdom, that the markets might change their mind any day now.
Third, all this presumes that if the markets were to lose faith in the US government, they would be reassured by short-term fiscal austerity. The available facts suggest otherwise: markets continue to treat Ireland, which has accepted savage austerity with little resistance, as being somewhat riskier than Spain, which has accepted austerity slowly and reluctantly.'
It all depends - on the situation, the economic nation, and the eyes that see - seems to be the paradox here.
For further information, please see:
http://news.bbc.co.uk/2/hi/business/10416895.stm
http://krugman.blogs.nytimes.com/2010/06/14/the-bad-logic-of-fiscal-austerity/?scp=2&sq=paul%20krugman&st=cse