Unformatted text preview: negative effects on growth in the long-run.
Countries where there have been unsustainable asset booms and there is now a large debt
overhang will likely have to devote fiscal resources to debt/financial sector restructuring,
leaving correspondingly less space for fiscal expansion to support demand. Maintaining
sufficient fiscal space to make deposit guarantees credible is of paramount importance in all
countries irrespective of the size of their debt overhangs with little room for policy
manoeuvres. High government debt displaces private investment. Now is the time for a
gradual shift back toward private investment, because when consumers believe fiscal
spending is not sustainable, public spending becomes less effective. • High unemployment In economies like the US and UK, despite the large fiscal stimuli, the economies are stalling
and unemployment rates are still high. The ILO estimates that the global crisis has led to 34
million more unemployed and the World Bank estimates that about 60 million people may
have been pushed into poverty. The ILO estimates that 29 to 43 percent of total increase in
unemployment were created or saved in the G20 cou...
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