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The global economic and financial crisis put public finances under strain across the globe. Governments provided large-scale support to the financial sector, and, as the crisis spread to the real economy, also designed extensive fiscal stimulus packages, which together with revenue decline led to increases in public deficits and debt stocks. Historically, developing and emerging economies have been more susceptible to debt sustainability risks, including a risk of sovereign default. This time, however, even with the improved prospects for the global economy, sustainability of public finances has become an issue for advanced economies, marking a new era of high fiscal risks, prolonged adjustments and low growth.
Concerns about fiscal solvency in Greece, Ireland and Portugal and most recently in Spain and Italy have had particularly profound implications for the functioning of the Eurozone and the EU, raising questions about its current design and institutions. Worries have also arisen about fiscal sustainability and a looming debt crisis in the US - while the country may not have short-term liquidity problems, the combination of high deficits, aging population and high rate of growth of health care costs pose a significant long-term challenge. In Japan, high national savings rates enabled the country to finance its public deficits internally up to now, but the debt-to-GDP ratio is expected to rise further - with the rapid ageing exacerbating fiscal sustainability issues. All together, advanced economies are likely to continue to run sizable deficits in the mid-term, further exacerbating the problem of fiscal sustainability.
This planning workshop is part of the Seminar's initiative "Unlocking the Debt Conundrum: Paths to Fiscal Sustainability", which in the first stage will bring 20-25 participants from international organizations, ministries of finance from major advanced economies, central banks, renowned think tanks and private banks to conduct a global scan of fiscal risks, discuss approaches or returning to fiscal sustainability and plan a three-year series of consequent programs aimed at advancing public debate about solutions to the advanced economies' daunting fiscal and economic challenges.
Jing Ulrich of J.P. Morgan explains, "Why Salzburg?"