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Vienna, 12.10.2018 G20 Summit: Löger in favour of open markets and an end to deficit spending

Continuing trade tensions and high debt levels are leading to more muted growth prospects – this represents a wake-up call, says Austrian Finance Minister Löger. 

Ten years after the 2008 financial crisis, the International Monetary Fund, while confirming that the global economy is doing well, is at the same time contemplating the possibility of an end to a ten-year phase of rapid global growth, and has provisionally cut its forecast for 2018 and 2019 from 3.9% to 3.7%. According to Austrian Finance Minister Hartwig Löger, this development, which is primarily due to continuing trade tensions and increased downside risks, in combination with a rapid rise in debt across a number of emerging markets and low-income countries, constitutes a wake-up call heralding a need to end the policy of deficit spending.

Indeed, as the IMF shows, those countries which already had strict banking regulation and greater fiscal scope prior to the financial crisis have been able to recover better. Therefore, in order to be better equipped to cope with future downturns, the IMF advises that advantage be taken of the current positive economic climate to consolidate fiscal buffers.

The rapid rise in debt ratios despite the current positive economic climate, particularly in a number of low-income countries, gives particular cause for concern in this regard. Indeed, measured against the GDP of emerging economies, government debt ratio has increased over the past five years by 11 percentage points, while low-income developing countries saw an even higher increase of 13.5 percentage points. 40% of developing countries run a higher risk of ending up in financial distress, which is double the percentage figure for 2013.

Finance Minister Löger, who attended the G20 Summit in his role as chairman of the EU Council of Finance Ministers, is therefore also arguing against a pro-cyclical debt policy. There is a need to take advantage of good economic times in order to make provision for years of weaker growth, says Löger. "In the context of our EU Council Presidency, we are working together closely with our European partners in order to reduce debt and strengthen structures in the financial sector. In Austria too, we have already made a clear commitment in this regard and signalled an end to deficit spending," added Löger. 

In the same vein, Council chairman Löger also spoke out on behalf of the EU in favour of open markets and rules-based multilateralism. In the view of both Löger and the EU, the WTO also requires modernisation. 

In addition to measures which the global community must take in order to counter downside economic risks, the focus at the G20 Summit was also on the opportunities and risks of digitalisation in relation to the economy, work and society. The so-called "Compact with Africa" was also discussed; this is intended to promote infrastructure projects in African nations with the help of private investment, and thereby facilitate economic-policy reforms. "The aim is to maintain the dynamic in order to ensure that reforms are implemented and investments are able to flow," declared Löger. 

On Thursday evening and Friday morning, at the G20 Summit held in Indonesia, finance ministers from the 19 leading industrial and emerging economies plus representatives from the EU held a joint meeting. On account of Austria's EU Council Presidency, Austrian Finance Minister Hartwig Löger represented the European Union at the meeting.