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August 23, 2011 Indebted Countries Need a Fiscal Rule

Indebted countries need to “establish an explicit fiscal rule that would prohibit debt increases by 2015 at the latest” in order to resolve the debt crisis. Such a rule should specify a debt ratio target of less than 60 percent. It should also specify how quickly this ratio should be achieved and how countercyclical finance policy should be until it is achieved. This will be Kiel Institute President and GES Director Dennis J. Snower’s beginning premise at the GES 2011 panel session entitled Redesigning Fiscal Consolidation and Debt Management. Further, according to Snower, action needs to be taken immediately, because “postponing stabilizing the debt-to-GNP ratio reduces creditworthiness,” which in turn increases the interest rate on new debts and thus exacerbates the problem.

The international financial crisis of 2009 and 2010, as well as years of mismanagement, has put great strain on public budgets in many industrialized countries. Public finances in most of the Western industrialized countries are in a terrible state. Action urgently needs to be taken in the countries in crisis in the EU, as well as in the USA and Japan.

How can exploding deficits be prevented in times of low growth? How can an indebted country be helped to consolidate its budget? And what kind of internal and external restrictions should apply to governments when consolidating their budgets? These and other questions will be discussed at the Global Economic Symposium in Kiel.

Kiel will turn into a think tank on 4–6 October, when more than 400 high-ranking experts from business, government, academia, and civil societies will meet for the fourth Global Economic Symposium (GES), which is being jointly hosted by the Kiel institute for the World Economy and the Bertelsmann Stiftung, in cooperation with the German National Library of Economics (ZBW) – Leibniz Information Centre for Economics. Among those expected to participate are Hans-Paul Bürkner, President and CEO of the Boston Consulting Group, René Obermann, CEO of Deutsche Telekom, Yves Leterme, Prime Minister of Belgium, and Erik Stark Maskin and Oliver E. Williamson, both Nobel laureates in economics.

To register to attend, please submit the accreditation application form by September 19. It may not be possible to accept late registrations for security reasons. Applications made on the days of the event will not be accepted. Our media agency will gladly help you arrange interviews. Please mention on your accreditation application form whom you would like to interview.

Please note that the conference will be held in English.

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