The deal struck for the tax is grabbing more attention at the G7 Finance Ministers meeting after the Leader’s Summit in Cornwall. This should have a major impact on the economy. This should transform the multinational, low tax jurisdictions and tax havens.
However, the most important decision right now is how to manage the withdrawal of the massive pandemic support packages. This is exactly why the upcoming Cornwall summit is of much importance.
The US President Joe Biden will echo the message of the Treasury Secretary Janet Yellen. It says the G7nations, including the UK, should not talk about the withdrawal of the support. Secretary Yellen said in a speech; the G7 economy has the fiscal space for speeding up its recovery. It is not only for the pre-covid situation but also to return to the growth path from pre-pandemic.
“This is why we continue to urge a shift in our thinking from ‘let’s not withdraw support too early’, to ‘what more can we do now – not just to end the pandemic, but to use fiscal policy to invest in addressing generational issues like climate change and inequality.”
She also said that all the G7 economics had their fiscal space to speed up their recoveries. It is not only backing up the size of the economy before the pandemic, but also it is catching up for the future.
Ms. Yellen points to the International Monetary Fund projections. It is showing that the US would be the first G7 economy to return to its pre-pandemic size. The credit goes to the vaccination rollout and the giant stimulus plan of President Biden.
Despite the record borrowing of facetime and the rise of inflation, the US is giving the message to the world to carry on. This way, the regaining of the growth lost in the pandemic will not create much momentum for the recovery.
The higher inflation was visible in the transitory factors. Thus the policy should look through it. Much of the inflation numbers are reflecting a return to the normal.
Some of the high inflation rates will be visible. But we have also seen some very low inflation rates. A lot of people have permanently lost their jobs. Those individuals may want to make their move to the various sectors of the economy. Hence the pandemic rescue, with climate change and the easing out of the financial support, is right now the most important judgment.