Both in Europe and America the cry is loud and clear that deficits should be whipped. Politicians are angry with the investors for discarding government bonds following the meltdown in Greece. But this sudden intense cry for austerity in fiscal measures, notably among the relatively strong economies, could boomerang leading to the stagnation of Europe for years; things could further worsen.

The position of America is not much different – it is courting high risks. The Democrats appear to have made a mess of the stimulus by favouring anti-deficit talk. The Republicans had all along seen this to be the short road to woo unhappy voters – considering that election is just around the bend.
The chairperson of the Federal Reserve Ben Bernanke, at a recent hearing said the two essential issues are generation of jobs and programs targeting financial stabilization. This alone will stop the recession from becoming a depression. He called out for “a strong commitment to fiscal responsibility in the longer run.” He emphasized on “longer run” but it is doubtful if many of the politicians were giving an ear to the nuance.
The crisis is far from over. Out of every ten workers one is without a job in USA as well as the European Union. Germany enjoys the best economic status but it is now suffering from 7% unemployment. In Spain unemployment is a staggering 20%. Despite this the Government of Germany is planning to slice its budget deficit – bring it down to 3% from 5% of the GDP by 2013. The Government of Spain is resolved to bring it down to 6% from 11.2%. The recently installed British Government has plans to wield the axe on spending when the budget is presented on 22nd June. And foreclosures and unemployment are directly related.
The fever of initiating cuts in budges has spread beyond Europe and America. In South Korea at a meeting of finance minister of the Group of 20 there was much lauding of the talks on slicing budgets.

The Obama government has cautioned that the recent austerity move could harm recovery. It is hotly being argued that the strong countries like Germany should not put on the brakes. In a correspondence to his colleagues of the G-20 group, Timothy Geithner, the Secretary of the Treasury cautioned that slicing of the budget would not have the desired effect “unless we are able to strengthen confidence in the global recovery.”

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