Zia Qureshi's blog

The current policy debate on spurring growth is sometimes couched as a choice between fiscal stimulus and structural reform. In the context of the euro zone, this gives an incomplete picture. Two other issues are important: financial policies to avert a credit crunch; and collective actions to rebuild confidence. Adding these complicates the picture but helps point the way to a fuller policy response and clearer priorities to address the current mutually reinforcing combination of a growing sovereign debt-banking problem on the one hand and risks of a recession on the other.

Much of the attention at the Cannes summit this week will be focused on addressing the crisis in the eurozone. But as president Zoellick emphasized in his press teleconference yesterday, the summit should aim to go beyond the immediate crisis-response actions to build some foundations for future growth. A focus on growth is the central theme of a report the Bank released yesterday as an input to the discussions in Cannes. The report conveys the following main messages:

• The global economy has entered a dangerous phase that threatens to stall economic recovery in advanced economies. Weaker growth in these economies and financial turmoil also threaten growth in developing countries that has been an engine driving the global economy. These developments call for a renewed G20 focus on growth. Actions to address immediate risks to financial stability must be complemented by actions to strengthen the foundations for global growth.
  

The themes and areas for action emphasized by the World Bank find a good reflection in the outcome of the recently concluded G-20 summit in Seoul, Korea.  The main theme of the report submitted by the Bank - that in a progressively multipolar world economy, the goals of global growth, rebalancing, and development are increasingly interconnected - had good resonance in the summit discussion. The point was made by several leaders, some echoing verbatim the report's message that rebalancing "should not be a zero-sum game, rotating demand from one to another", that the "objective is to lift growth, not just shift growth", and that "developing countries can be an important source of new demand for stronger and more balanced global growth" (words from para 2 of the report's executive summary).  For example, UK's prime minister David Cameron said exactly that.  India's prime minister Manmohan Singh made the same point, echoed also by presidents Hu Jintao (China), Lula (Brazil), and Zuma (South Africa).