|FISCAL RISK AND FINANCIAL STABILITY: MANAGING INTERDEPENDENCIES AND SOVEREIGN RISK - SESSION 2: RESTORING PUBLIC DEBT SUSTAINABILITY IN A HIGH-RISK ENVIRONMENT|
|Wednesday October 10, 2012|
11:30 AM - 01:00 PM
Hotel Okura Heian
Fiscal Risk And Financial
Managing Interdependencies And Sovereign Risk
The global economy and financial markets are facing unprecedented uncertainty.
Public debt levels are high and rising while financial stability remains
at risk. The advanced economies - particularly in Europe - remain at the
epicenter of many of these macro-financial pressures. Emerging economies
are not immune and are bracing to combat the fallout of crises elsewhere.
The lesson of recent years is how closely intertwined fiscal and financial
stability are, how easily contagion and adverse spillovers can spread across
borders and within regions, and how quickly the ability of governments
to access capital markets for debt financing can be impaired. This has
led to heightened attention to "sovereign risk" from governments
and financial markets and recognition of the need for pre-emptive policies
to ensure confidence in sustainability of public debt policies. This seminar
thus seeked to discuss fiscal-financial interdependencies and their policy
and capital market implications, and how best should conventional fiscal
and monetary policies be augmented to manage sovereign risk.
Session 2: Restoring Public Debt Sustainability in a High-Risk Environment
This session discussed policies to restore
long-term debt sustainability when financial sector vulnerabilities remain
Key questions included:
- What is the appropriate pace and composition of fiscal
adjustment that can restore investor confidence without undermining growth
and financial system soundness?
- How fast should support to the financial sector be unwound,
and what backstopping arrangements should replace it, if any?
- How should social security and other structural challenges
be addressed to contain entitlement spending, supporting long-term fiscal
- What lessons can be learned from recent institutional
arrangements such as fiscal rules to lock in fiscal reforms and increase
This was the second session in a two-part seminar "Fiscal Risk and
Financial Stability: Managing Interdependencies and Sovereign Risk".
The preceding session was Session 1: Sovereign Risk, Capital Markets, and
Financial Stability: The Interconnections.
|Panelist(s):||Vítor Constâncio , Vice President, European Central Bank|
Takehiko Nakao , Vice Minister of Finance for International Affairs, Japan
Peter Orszag , Vice Chairman, Global Banking, Citigroup, United States
Jean Pisani-Ferry , Director, Bruegel Institute, Belgium and Professor, University of Paris-Dauphine, France
Nemat Shafik , Deputy Managing Director, International Monetary Fund
Ignazio Visco , Governor, Bank of Italy
|Organized by:||Sanjeev Gupta and Jimmy McHugh, Fiscal Affairs Department - International Monetary Fund; in collaboration with the Ministry of Finance, Japan|