Can stalemate over the budget lead to monetary reform?
FORBES: The Budget Stalemate Shows The Need For Monetary Reform
The government is clearly serious about economic reform: it pushed through a tough budget endorsed by the International Monetary fund (IMF) on March 29th.
Rather than focus on social spending, he paid off International Monetary Fund (IMF) loans and produced budget surpluses.
European leaders are meeting in Brussels this week to discuss the region's debt crisis, and policymakers will consider creating a separate budget for the 17-nation monetary union.
Not for the first time, we're reminded that these extraordinary times have made the dividing line between Bank's "independent monetary policy" and the government's budget plans rather murky.
Indeed, as both America and, ironically, Germany found in the 1980s and 1990s, big budget deficits, if allied to tight monetary policy, often strengthen rather than weaken a currency by increasing foreign demand for it.
To ensure overall success, the GOP budget must be accompanied by pro-growth monetary reforms.
To join economic and monetary union (EMU), Hungary must have a budget deficit of less than 3% of GDP.
Andrew Burns, head author of the report, said developing countries need to reduce their fiscal vulnerabilities by lowering short-term debt levels, reducing their budget deficits and returning to a more neutral monetary policy stance instead of constantly cutting rates to historic lows.
Budget cuts are never painless, but within a monetary union individual cuts can be excruciating.
Monetary Affairs Commissioner Pedro Solbes, Administration Commissioner Neil Kinnock and Budget Commissioner Michaele Schreyer are all seen as sharing some responsibility by MEPs.
Total tax revenue has fallen considerably below target this year, forcing the government to implement additional austerity measures to meet even the more relaxed budget deficit targets agreed with the EU and International Monetary Fund in September.
Brazil was one of the first to successfully scrap the old Washington Consensus model of debt service and budget cuts, paying off its loans with the International Monetary Fund in the first few years of the Lula presidency.
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Under their single European monetary policy, euro-zone countries have already agreed to limit their budget deficits and to respect broad guidelines in making economic policy.
That is why stalemate on the budget may be the trigger that elevates achieving economic growth through monetary reform to the top of the political agenda.
FORBES: The Budget Stalemate Shows The Need For Monetary Reform
There's long been pressure domestically in Britain to ease off the budget cuts, but in the past few days the International Monetary Fund also chimed in.
Mr Osborne first suggested extending the scheme in his Budget in March, and the Bank of England's Monetary Policy Committee said there may be "merit" in an extension when it met earlier this month.
Those demands from Europe are also at the heart of Greece's political turmoil as voters in the heavily indebted nation revolt against the harsh budget-cutting medicine doled out by the European Union and International Monetary Fund.
The U.S. will have some big challenges up ahead, and they are mostly conservative challenges: getting the budget back in line, tax reform, getting the economy going, monetary reform, entitlement and welfare reform, and shrinking government overall from the bloated state it has been in since World War II.
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Already, European Commissioner for Economic and Monetary Affairs Olli Rehn has suggested that Spain could be given more leeway to meet strict budget targets if the Spanish economy continues to contract.
FORBES: EUR Strangled By Vanilla Options And Shallow Pullbacks
Monetary reform has the power to turbocharge economic growth, creating jobs for voters and balancing the budget.
Other than monetary policy, no area of economic discussion is more confused than the one about government spending and budget deficits.
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Excluding costs associated with the bailout of Irish banks, Ireland's 2011 budget deficit was estimated at 9.4% of GDP, according to the International Monetary Fund.
At the other extreme, Ireland, which ran a large budget surplus last year, might be forced to run an even bigger one if the single monetary policy is not tight enough to suit its needs.
These factors include: the European sovereign-debt markets in chaos threatening the viability of the euro, the budget deadlock in the U.S. Congress, Federal Reserve Chairman Ben Bernanke implying yet more monetary ease, rating agencies threatening a downgrade on U.S. debt and Middle East turmoil.
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