Instead, the structural deficit should be the appropriate target variable, and the cyclical deficit would correct itself through the economy’s automatic fiscal stabilisers, provided that growthenhancing measures supplement fiscal consolidation {this is my FT article, January 2012}. Secondly, there is a certain misperception in the MoUs about how reforms would work in the economy.
In preparation for such a future possibility, I think it is important for Asian countries to deepen their understanding of the implications and lessons to be learned from the current Eurozone crisis. I would like to touch briefly upon three issues.