In this respect, fiscal policies have a great potential for fostering confidence and thereby supporting activity, even in the short run. Establishing a well designed medium-term consolidation strategy in those countries currently struggling with increasing fiscal imbalances would make a major contribution in this direction.
In the past 30 years we have seen the growth of a truly global financial system. Financial markets and institutions no longer stop at national borders. For example, the amount lent by banks cross-border in 1983 was $ billion. By 2008, the year that the financial crisis became global, that figure had risen to $ trillion.