In our opinion, this can be done by using existing European resources more efficiently. These steps must be complemented by governance reforms and credible fiscal arrangements within the European monetary union. In other advanced countries, the priority must be to agree on credible, concrete and executable plans to restore fiscal sustainability consistent with the commitments made at last year’s G-20 Leaders Summit in Toronto.
In many emerging-market economies, greater exchange rate flexibility is necessary to better manage demand pressures and inflationary risks, while facilitating a global rebalancing of demand. Greater exchange rate flexibility between the United States and China is required to help the recovery in the former and control inflation in the latter.