2  BIS central bankers’ speeches  At a time of continued private sector and bank deleveraging, excessively deep public sector austerity is likely to generate and reinforce negative growth and debt dynamics: as growth falls, the debt to GDP ratio increases, and if debt is reduced too fast, growth will fall even more.
There is no doubt that some countries have excessive fiscal burdens and unsustainable fiscal positions. Those countries have to adjust, and take the pain, but a key question is over what time horizon. Nor does it mean that all countries should be following austerity measures. If they do, and the austerity measures proposed are excessive, it will only reinforce the global downturn.