The Group of Eight industrialised nations are now looking for ways to unwind the emergency rescue measures taken by their respective governments and central banks so that the economies return to self-sustaining growth and private sector can enter the space left by the governments.
Finance ministers of the G-8 countries, at their meeting in L'Aquila, southern Italy, in July are expected to discuss an "appropriate framework" for ending the stimulus policies. They will also seek help from the International Monetary Fund for arriving at an appropriate strategy to achieve it.
The IMF study that would detail when and how to cut state spending, bring budget deficits under control and raise central banks' key interest rates, is expected to be ready by the time the G-8 meet in Istanbul in October.
At the same time, the ministers are also expected to reiterate their commitment to increased stimulus spending and global economic relief as long as it did not to revive inflationary pressures.
Almost all of the G-8 countries, except perhaps for the US and the UK, are now seriously looking for ways to unwind emergency steps to rescue their economies once recovery is certain, the G-8 finance ministers said in a draft statement.
The ministers are of the view that the stimulus has had a positive effect on the economies, but they are not sure of the real impact of the measures. Although there was no unified stress test on economies across the developed world, the joint communique showed the group is now more positive than it has been since the credit crisis deepened last year.
Canadian finance minister Jim Flaherty has called for an exit strategy, in order that the economies move toward growth and the private sector step in where state exits. US Federal Reserve chief Ben Bernanke also had said that the United States must now think of restoring fiscal balance.
US treasury secretary Timothy Geithner, however, said while the ''force of the global storm is receding a bit,'' the US and other countries still need to "take stock" of recovery efforts, stimulus work is not yet finished.
The US, Japan, Germany, France, Britain, Italy, Canada, Russia and the European Union are trying to set the agenda for a meeting of G-8 national leaders in July in earthquake-stricken L'Aquila in central Italy.
While the United States and the UK are expected to egg on other members of the G-8 countries to continue expansionary monetary and fiscal policies, Canada and several European countries are now looking for a way out of the spending spree.
The reduction in tax rates and interest rates combined with the money supply expansion, mainly in the US and the UK, could fuel inflation and leave governments heavily in debt, they fear, the IMF said in a recent report.
Tighter financial conditions, falling wealth, and greater uncertainty have triggered a sharp decline in all types of demand. In parallel with the rest of the world, Europe has entered a deep recession, and there is a risk that the recovery will be delayed, especially if policymakers do not address problems in the financial sector head on.
The IMF's most recent forecast for 2009 sees a sharp economic contraction in advanced Europe. In emerging Europe, output is also projected to fall steeply. Several countries in central and eastern Europe, including Belarus, Hungary, Latvia, and Ukraine, are in deep crisis and have requested financial assistance from the IMF, the European Union, the World Bank, and other partners.
''Beyond the immediate need for crisis management, Europe must revisit the frameworks on which the European Union is based because many have been found wanting. Most pressing is the need to overhaul the European Union's financial stability framework,'' Marek Belka, director of the IMF's European Department, wrote in the lead article in the June 2009 issue of the IMF's quarterly magazine Finance & Development.
The crisis is also testing the new central and eastern European members of the European Union. But in many respects, one key European institution has proved its mettle - the euro. The financial-and now economic-crisis has presented the euro area with a large number of varied tests. But one thing these countries don't need to worry about is their currencies, because the euro works and that is no mean feat, IMF said in the report.