Britain could end up as one of the systemically important major economies whose performance would warrant regular review by the International Monetary Fund (IMF).
This weekend the G20 is expected to reach an agreement on a set of "indicative guidelines" – criteria that would determine whether a nation's economy would need to be subject to this higher level of IMF scrutiny. These would include various criteria like budget deficit, trade imbalances, and the size of the nation's economy to potentially cause "spillover" damage and add to the global economic imbalances.
The chancellor, George Osborne, told reporters at the IMF's spring meeting in Washington, DC that he expected the UK to be among such countries, given the high levels of UK's public and private debt. He added that he "positively welcomed" the development as something the UK has been "in the forefront of arguing for".
He said, "In future, the IMF will be going into countries and assessing in an independent way their contributions to the imbalances." He added that the UK had taken note of the IMF's willingness to be robust in challenging the US, adding that he hoped other countries would also respond to the IMF's reviews, though there would be no sanctions if they were ignored. Other nations that would be subject to the arrangements would be the US, China, Germany and Japan. The IMF intends to take large surpluses, for instance, as seriously as large trade deficit
The step would mark a new milestone in the international community's long struggle to address the global economic imbalances that were a factor in the in triggering the worst recession in three-quarters of a century, according to analysts. They say the advent of these new "spillover reports" would by far be the most important achievement of the meeting of G20 leaders this weekend.
Osborne was also quick to point out the measures proposed by president Barack Obama to reduce the US federal deficit as evidence that the White House, long held up by Labour as the counter to the cuts policy was acting on the same lines and was following what he had outlined for speeding up the process of deficit reduction.