Slow Down, G20!

I am amazed that in the G20 meeting last week, leaders of some countries such as France and Germany were proposing that participants started to explore some exit strategies with regards to the stimulus package put in place in response to the financial crisis. Although France and Germany are officially out of recession and may have better use for the resources previously allocated as part of the stimulus package, I think they should slow down and review more indicators before making such bold proposal.

2 main reasons justify my view that such proposal is unwise. Firstly, although green shoots have started to appear in some economies, they are, as the name suggests, still “young”. Policies which are ambiguous in nature may cause these shoots to wither, resulting in another round of recession. Under such circumstances, recovery will most likely be W-shaped rather than V or U. Secondly, there are after-effects of recession such as unemployment which must be taken care of. Critics may say that as global economy recovers, all these will self-correct. I agree with this statement but I believe it is the responsibility of every government to make sure that this self-correcting period is as short and as painless as possible to the people. Without government intervention or more appropriately, government aid, the self-correcting period may be longer and more painful.

In view of these 2 reasons, I will advise leaders not to think about exit strategies at the moment. There are still many things to do before exit strategies should become a main discussion point. Currently, policies should remain expansionary and confidence-boosting. Any opposite moves will greatly blunt all the efforts that have been put into ending this crisis.