be larger than what would happen if there is a plan for a gradual adjustment. one example again is the united states, where in the absence of any additional measures, there will be a tightening in 2013 of about 3.5% points of gdp in one year which would be the largest fiscal adjustment in a single year since, i believe, 1947, when, of course, the deficit declined a lot, because of the ending of military spending, at the end of the war. the -- just a few words on emerging economies. there is -- i don't have his life but it is pretty simple. there was considerable adjustment in 2011. the adjustment virtually coming to an end in 2012, but we regard

these as worldly appropriate on average, because the fiscal accounts of the emerging economies are now -- in such a weaker shape as the fiscal accounts of the vast keconomies. some countries with high debt will have to continue the adjustment over time, also for emerging economies. let me just summarize some key policy inclusions from this situation. the fiscal adjustment needs to proceed at a steady pace. not too fast. not too slow, if there is fiscal space. this means that either shocks to growth if growth follows with respect to our current projections. we think countries should let the -- this means that if there is a loss of revenues because

there is less growth, this loss of revenue should not be offset by further tightening measures that will make things more difficult. in an uncertain environment, countries with fiscal space could also slow down the pace of fiscal adjustment in case of shocks. second point, in presentation of a clear median fiscal adjustment plan is a requirement for sustainable growth. we support fiscal institution. there has been significant progress in strengthening fiscal institutions. as you know, in the ual we -- further steps in the ur would have to be taken over the median turn towards a stronger, far more fiscal federal. better risk of sharing tools of progress towards, on the issue

being discussed. but no decision yet has been taken. eventually, also, a stronger for the eu budget. these are things that is important that there is a plan. that there is a shared consensus on what to do in these areas. further, institutions also needed in other parts of the world, including in the united states where as you know the budgetary policies is far from perfect. equally important, i did not show you any number on this, but equally important it the process of long-term reform in spending for pensions and health care. finally, growth enhancing measures are very important for the fiscal accounts. here i'm talking about measures to boost the potential growth. growth over the median term.

and i want to end this -- with an optimistic remark. and a note of optimism. bringing down public debt to the level where it was before the crisis seems now almost impossible, but the task will be greatly facilitated if countries grew faster over the longer run. we have computed that an increase in potential growth of just a quarter of a percentage point of gdp could set in place a virtual circumstance that would lead after ten years to a decline in the public debt to gdp ratio by 6 percentage point with only a quarter percentage point of additional growth, because higher potential growth allows, makes it easier to run primary surpluses, lowers the

public debt to gdp ratio directly. this in turn lowers interest rates, which in turn boosts economy growth. if this -- if this circle is activated, this circle between growth and public debt is circulated. what many regard now as an almost impossible task, lowering public debt to where it was before the crisis, will look considerably easier. so with this i would like to thank you for your attention, and we are ready to take your questions. >> thank you. thank you very much, carlo. we will now open for question. can i remind you we have interpreters. french on channel 2, spanish on channel 3. let's start with a question right here. >> hi. thank you. howard schein with the washington post. i want to elaborate. what struck me in reading this

was, seems to be at some level a fundamental rethinking or new research or new understanding about fiscal mute plier, the buffering effects of central bank bond purchases, about the degree to which growth debt versus net debt what you really should be looking at and you seem to almost be saying we didn't quite understand what we were getting into with the austerity plans and they may all be self-defeating, and debt may not matter as much as we thought it did? >> no. i don't think that there was any fundamental rethinking. we have new evidence in support of what we've been saying for a while. namly, that for countries that do not need that to adjust, that are not under pressure for markets, the best thing to do is to adjust at the gradual pace, as it was mentioned by mr. schein in the 9:00 press conference. we have been saying this for about two years. the place of adjustment needs to

be not to fast, not too slow. wrap we adopted to the analysis is the fact that we have confirmed what was our -- our priority. namely the fiscal suppliers. the loss of growth in fiscal pros is larger if you start from a situation like the one when the -- with unemployment is large. but these are refinements of what we've been arguing over the last two years. that there is not really any thinking about our recommendations. >> thank you. andy robinson from spain. i just want to ask you a couple of questions about the reference to spain here. you quote, although a slightly more moderate adjustment, the bert accommodated cyclical

developments would have been preferable. i mean, that raises a whole series of questions. the first one is, would you have -- the original plan to tally the higher deficit? secondly, putting them into more of the terms i would use as a journalist does that mean that more harm is being inflicted on the spanish people than is necessary? >> no, i don't think there is a fundamental difference regarding what is the proper fiscal target for spain. spain is phafacing, one of the countries subject to market pressures. we think that the target is broadly -- yes, could have been perhaps a bit less ambitious, but not a fundamental difference. what is critical now is that the fiscal target is, is achieved. we think at the moment that we project i think a deficit what tha is somewhat larger than the official target. 6% against 5.3%. i think this is primarily due to

the difficulty we see in controlling the position of regions in spain. so i think it would be important to continue with an effort to have a better control on the regions in spain. but i don't think we have a fundamental issue with fiscal policy, the fiscal policy target in spain is here. >> can you wait for the mike for a second? >> is that fiscal space in spain to proceed at a slower rate? basically yes or no? >> i don't any there is a major difference in this. so with respect to the targets, the fiscal market could have been a bit smaller, but i don't think there is a fundamental difference. in other words, there is not much fiscal space. >> a question right here. >> hi. i work for a news agency in

berlin. would you counsel the german government to do? looking at your figures it looks like there's no need for any further adjustment in the broad space. and still the german government imposes the fiscal compact on the other euro countries. not only when it comes to the actual debt and the new budgets but also in the overhanging that, from the old years. what do you think should be done thereabout? is that appropriate? >> i'll respond to the question, about germany. as carlo showed in the slide's opening, there's relatively small adjustment plans in germany in both 2012 and 2013. in fact, in both your slower adjustments than we initially expected. this is fine, because it reflects to some extent the overperformance that occurred in previous years. carlo talked about how countries with fiscal space could choose

to go a little bit slower in their adjustment plans to address downside risks. and certainly germany is in a relatively strong fiscal position or would have the opportunity to do that. at the same time we should recognize there's not much adjustment to begin with. under germany's rule, there is limited scope to go more slowly in adjustment in any case. germany is a kaunt country that should allow this. if growth turns out to be slower we think germany should tolerate a slightly slower deficit as a result of the impact of slower growth. in the event, much sharper decline in growth, clearly for authorities to review this in the event of a very short slowdown. >> one question online, which brings us to the issues affecting low-income countries. this is a question from martin luther from uganda, and the

question is -- how do we view the problem, the fiscal problems in low-income countries, which are now facing the problem of reduced earnings from less commodity exports, because of weak ex-tternal dema. martine, maybe? >> yes, thank you. there are two ways basically in which the flat tuition prices can affect low-income countries. for commodity exporter on the revenue side. and prices affect, and in demand, also affect the revenues. and, therefore, restrict the amount that they can spend when prices are low, an increase. when price, high. so the solution on this case is something that we have advised repeatedly is to define a smoothing pass in the spending of these revenues so as not to spend too much when the prices

are high so as to allow better spending when the prices are low, and this is in both economies in africa, considering this option. the other problem it raises was on the spending side, because many of these economies have subsidies. in particular for food prices ap pnd when prices are extremely high as has been the cases as recently, the spending on the subsidies squeezes out spending on other with the public investment and social spending. and the solution also advised repeatedly to reform subsidies generally benefit mostly the segment of the population, and relace place them by targeted transfer that would help the transfer hurt by the increases on such prices. >> thank you very much. a question right here in the front.

>> hi. i have a couple of questions abbottly. italy. one is on the slide you show us about the fiscal adjustment needed for the 2012 and 2013. and the other one was on, about, on some tables in the fiscal monitor, the one on page 61 and then out italy is going to misse budget target in the next few years. if you can explain this. if you can -- and what kind of reforms does italy need? >> yes. now, on the -- on the -- >> thank you. >> thank you. on the the balanced budget -- yeah. you have the numbers we project a deficit for next year of about 1.5% of gdp. this is due to the fact we have

a lower growth projection for italy. it's interesting to note two things. that even this deficit, even if it materialized, it would be the third lowest deaf ted in the area. only germany and finland would have a lower deficit. i would also underscore that the net of affects would actually be a surplus. i think of about 0.5, 0.6% of gdp. that's important, because more and more in the area, the fiscal rules are focusing on targets that are net of the affects. the fact that italy will be running a primary surplus, net of the cycle, is very important for next year. >> a question right here in the white shirt. >> thank you. from china's media.

elections are expected to increase on may 6th and this time the entire austerity parties are expected to do quite well. how do you think this kind of pledge turmoil in greece can have an impact on the implantation of the so-called growth of competitiveness pact in the whole area? thank you. >> i think -- your question is about how we would in fact implementation of -- in grease or in the whole area ratio? >> in grease, but al-- grooetee also in the entire area. >> the fiscal measures are part of the program. they are needed because of the economy. the greek economy. i don't think it is a matter of political choice at one point. the program that the greek authorities are implementing is a program that is based not only

on fiscal adjustment. there was a lot of fiscal adjustment in 2010 and some adjustment in 2011. looking forward for the adjustment, not that strong as in the past. what is critical is the measures being undertaken to re-establish the basis for economic growth. including the economy of competitiveness. which is growth. these are things that have to happen regardless of who is in power. so regardless of the outcome of the elections. >> thank you very much. another question online. we have a newspaper asking about our advice for writing down household debt. on this i jut wanted to remind there is a whole chapter that was published today about household debt and remind the journalist to "the wheel" and kathleen martin from "business world" asking about the philippines. what is the expected trend for emerging markets, specifically to philippines with regards to fiscal policy.

a balances need of 10.2% of gdp traveling. what should be the country with respect to fiscal policy? >> i'm pretty familiar with the philippine situation, but many emerging markets i think like the philippines have relatively high debt levels. that they still have to redice to face -- to come to a more sustainable situation over the medium terms. when this high level of debts are combined with large deficit or widening deficits, then it certainly restricts their capacity to react in the short term and to react to changes in the global economy that may affect them adversary. so it's particularly important for them to define a medium term strategy to put their public finance back on a sustainable foot. that's particularly urgent for many emerging economy, because of the demographics prospect that will certainly increase the

average age the population. therefore increase the need to spend on pension and health-related, health-related health care. >> thank you very much. right there at the back? >> ian. dow jones. wondering if you can give us some estimation, since you outlined the -- the debt needs or the debt for most countries out several years. what italy's and spain's financing costs are for the next two years? >> a difference in cost, i don't remember by heart. you find them in the fiscal monitor. you have to look at the difference overall debt and primary deficit. that tells you the burden of interest payments with respect to gdp. so, but the overidea is that the things to the measures that have been implemented, there will be

gradual decline spreads for both countries. >> and do those -- do those refinancing costs, how do thez refinancing costs for spain and italy compare to the, the fire wall that europe has put together? >> i think the question, what you're asking, what is the role of fire walls in bringing down in interest rates. i think it's a very important role. we argue that the successful fiscal adjustment in europe as well as in other countries requires not only fiscal measure, but it also requires the availability of resources to support the fiscal adjustment. so we are very happy about the increase in fire walls in europe. this is only part of the story, however. we now need, in addition to european fire walls, we need the global fire walls. and that's white stronger global

fire walls. that's why the imf asked for increased sources available to support countries that are undertaking economic adjustment, and we hope we make progress during this week on this issue as well. >> yes? the gentleman -- right there. thank you. >> from uganda. i would like to know, what if countries -- like uganda, which updated the -- [ inaudible ] such as for higher -- i would like to know how much more can they expand fiscal policy and higher growth next year as per your -- as per your new focus? >> excuse me. the main issue for the eac or

the eac economies i understand now is on the inflation side. they have suffered from relatively high inflation. it's quite important both for growth and for confidence to be restored with inflation to be controlled. on the fiscal side, the aspects that are more important are more how can fiscal policy support growth? as you said, this is a challenge for economies that have relatively high birth rate and growth has been satisfactory, but insufficient so far to reduce poverty. in these aspects there are two important aspects. one is to increase revenues. revenue mobilization is relatively low in most of east africa and certainly should be raise through proper tax reforms as to ensure that the population pays and especially the most better off section pay a fair share of tax revenue to ensure higher spending. the other aspect is redirect

spending towards growth enhancing expenditure. a particular infrastructure spending. the significant gaps in availability of powers and roads in east africa, and it would be particularly important to find ways of free spending, free resources, so that these investments can be executed, and also define ways in which these investments can be well selected and well implemented so that effectively the country gets to higher growth. >> right there. >> thank you. from china's 21st century business herald. your presentation, you specifically named u.s. as a country that needs further improvement on its fiscal adjustment. i'd like to know if there is a scale among countries in terms of their achievements so far on the fiscal adjustment, how much would u.s. score? and the second, i want to know,

it's been three years since the fiscal monitor was introduced in imf. could you tell me how influential this tool is? especially to the, you know, the policymakers? thank you. >> i'll take the second question. i think it is very influential. i'm sure that it will become -- we'll have succeeded in making very influential when the fiscal monitor, now red, because fiscal accounts are in red, will be able to make it and change the color of the fiscal market. that will be a sign of success. now, on fiscal policy in the united states, i think that quite a lot of adjustment has taken place. as i showed you on the slide in 2011. and we are projecting further adjustment to take place in 2012. as i mentioned, without any

additional action, there will be a major tightening in 2013, which we would regard as excessive. 3.5 percentage point gdp in one year will be far too excessive. what is needed by the united states is that a clear consensus, a political consensus, is reached on a medium term fiscal conservation plan and the not just the targets but the tools to achieve the plans. you know, there is a lot of disagreement especially where they should be more on the spending side, and on the revenue side. as i mentioned more than once, the adjustment in a country like the united states can be at a pace, but it needs to be a steady pace over the next few years, and one big issue that is worth keeping in mind is the major challenge of health care reform that is still there in terms of imbalances that would arise over the next 20 years from health care spending.

>> okay. question right here in the front. >> [ speaking in foreign language ] italy. another question about my country. you said before the government will not reach the target of balance deficit. balance budget, because the growth is slower than expected. according to the statistical table number one if i understand well, this is balance budget will not be reached until 2017. am i right? am i wrong? is it -- >> the numbers are there. you have to realize what happens beyond, say, 2013, 2014, there is much more uncertainty, and it hinges on growth. on whether italy will be able to

increase its growth rate over time. we have evidently -- we know we have relative conservative growth projectionses vis-a-vis other agencies. at the moment, that's our best projection, but i'm the first one to acknowledge that there's huge uncertainty about what growth will do. i think more than thinking about growth it's important to think about the measures that are needed to support growth, and the italian government has really done a great deal to implement the measures that are needed to revive economic growth in italy over the median term. >> thank you, carlo. question right there? >> [ speaking in foreign language ]. >> translator: i'm from the dominican republic and i'm going to speak in spanish.

>> so why don't you go ahead. >> [ speaking in foreign language ]. >> translator: thank you. my country has to do with the latin-american region where you have just about 3.7% projected growth, and in terms of my own country, dominican republic, we are stagnating since 2012, 2013, there's stagnation. >> the question was about latin america. about growth prospects for latin america specific focus on dominican republic will growth is suggested not to take off in the next year or two. i think in general, in the, in

the short term, the financial situation, or the fiscal situation in emerging market economies including in latin america is relatively strong. for the most part, as carlo pointed out and ms. martine responded in her question, most of the emerging market economies have relatively lower debt stocks than advanced economy dos and relatively stronger overall balance positions, which allowed them to adopt a more moderate approach towards fiscal tightening. which is particularly appropriate. given the risk to the outlook. from a longer term perspective, virtually all of the countries in the region face issues related to population aging. some will reach those issues sooner rather than later but all face an issue of population aging and, therefore, there's a need in all of these countries for continued strengthening of the fiscal position over the median term to provide support for, to prevent an enlarged increase in debt and to allow the fiscal accounts to