Governments that run fiscal deficits bigger than 3% of GDP must take swift corrective action.
Colombia's future finance minister promised "serious, swift" action against an expected budget deficit of 5% of GDP.
Nevertheless there is cause for optimism that though a solution may not be swift, it is on the way.The country's real GDP contracted at an annual rate of 3.3% during the April-June quarter, the third consecutive quarterly decline.
Moreover, none of the surveys point to a swift, strong recovery: at best a small increase in euro-area GDP in the first quarter of the year, after a probable contraction in the fourth quarter of 2001.
But it also makes the case for a swifter plan to cut the deficit over the next parliament, reaching 5% of GDP by 2015-16 rathan then the 4% envisaged by Labour.
For instance, in the first quarter of 1994, seasonally adjusted GDP grew 5.48%% and in 2002, after a brief decrease, there was a swift recovery in output and its average variation in absolute terms was of 3.53 %.
Correction: Japan's GDP Reprints Related items India's new government: Coming down to earthMay 27th 2004The swiftest riposte† to this line of thinking comes from Arvind Panagariya, an economist at the University of Columbia.
Abigail McKenna, who sits on the committee, says the government could service this by increasing its fiscal surplus to around 3.5% of GDP and raising fresh money in the international markets.Though agreement is not impossible, it is not likely to be swift.
