As soon as the G20 conference at Toronto ended with the US and the EU declaring their views on recovery do not conflict with each other, the BIS – the Bank for International Settlements – struck a different note telling that the governments must cut their budget deficits decisively and Central Banks should not wait too long to raise borrowing costs as side effects from measures stipulated to tackle global recession may invite next crisis. The global economy as well as financial markets were on the mend, though the recovery remained fragile in the advanced economies and in the euro zone the debt crisis put the recovery at risk, the BIS said in its annual report, published on Monday. Though the US president Mr Obama has warned against cutting too fast stating that it would put recovery in danger, global leaders who met in Toronto last weekend have agreed to take different paths for cutting budget deficits and not to impose global tax on banking system. Now the BIS seems to be siding with the EU, as its head warns there remains no time to waste.

"We cannot wait for the resumption of strong growth to begin the process of policy correction," BIS general manager Jaime Caruana told the bank’s annual general meeting. "In particular, delaying fiscal policy adjustment would only risk renewed financial volatility, market disruptions and funding stress" Caruana added according to Reuters. Caruana later acknowledged in a news conference that recently announced fiscal consolidation in some countries together with the publication of bank stress tests in Europe and the support of the G20 for regulatory reforms were important steps forward. As a bank to central banks and a discussion forum for policy makers the BIS said reforming the financial system is the most important to prevent further crises. Caruana said the benefit of making the financial system more resilient through tighter regulation outweighed any short-term growth losses.  

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