Mr. Motomura (Japan) considered that the criterion of zero nominal growth should have governed the preparation of the programme budget.

As for the 2006 2007 regular budget, Mexico had expressed its preference in the Programme and Budget Committee for a nominal zero growth budget.

The principle of zero nominal growth in the proposed 2006 2007 programme budget was difficult to reconcile with the new challenges facing the Organization.

( OF NOMINAL GDP)

What would help is if their nominal disposable income rose relative to their (fixed) debt service. Yet, with high levels of unemployment likely to keep nominal wage growth relatively subdued, typical troubled households could be worse off with higher food and fuel prices cutting into disposable income.

If nominal interest rates are lower than the real return on investment associated with GDP growth the result is financial repression and increased income and wealth inequality. To avoid this outcome, as long as China s GDP growth exceeds that of OECD economies, its nominal interest rates must also be higher, its exchange rate must be more flexible, and it must tolerate higher structural inflation.

The regular budgets of the specialized agencies, based on assessed contributions, have been locked at historically low levels because of the application of zero or no nominal growth policies.

But if the best way to reduce sovereign over indebtedness is to achieve higher nominal GDP growth (the combination of real growth and inflation), cutting investment a key ingredient in a pro growth strategy is not a sound approach. Instead, budget rules should segregate public investment, thereby facilitating a differential response in fiscal consolidation.

Greece s nominal debt stock will matter only once the country re enters the debt markets and becomes subject to market, not concessional, borrowing terms. In the meantime, Greece must implement the structural reforms needed to restore the country s long term growth prospects and thus to strengthen its capacity to repay its creditors without a large nominal debt reduction.

States which advocated conditions such as budget ceilings and zero nominal growth before they would approve reduced budgets which failed to meet the Organization's needs were showing the true extent of their political will.

Europe as a whole is barely above zero growth, with large variations among countries, though with some evidence of painful re convergence, at least in terms of nominal unit labor costs. China s growth, meanwhile, is leveling off at 7 , with other developing countries preparing for higher interest rates.

To get pensions down by one percentage point of GDP, nominal economic growth of just 4 per year for two years would suffice with no further cuts. Why not have credible measures to achieve that goal?

A stimulus package of less than prudent fixed asset investment, adopted in response to the 2008 global financial crisis, sustained 9 GDP growth for two years. But, after 2011, stimulus turned to macroeconomic tightening, causing investment growth to plummet from a nominal rate of over 30 to about 10 recently.

The European Central Bank s latest assessment is bleak, and ECB President Mario Draghi has made no secret of the fact that risks remain on the downside. Nominal GDP growth that is, real growth plus inflation will not exceed 1.5 this year and may well end up perilously close to 1 .

With more than 100 million people still below the official poverty line and per capita income currently just over 6,000 in nominal terms, robust economic growth must be maintained. Outgoing President Hu Jintao indicated that China s total GDP and per capita income should double by 2020, which will require 7.5 average annual growth.

Lastly, the division and nominal value of the shares had not been specified.

At first blush, this seems absurd Why would anyone want to lend money for a negative nominal return when they could simply hold on to the cash and at least not lose in nominal terms?

We should bear in mind the need to obtain the most efficient and optimal results, as the resources dedicated to any of these mandates are finite and inelastic, especially in an era of zero nominal growth in most United Nations budget lines.

The General Assembly had adopted no resolution approving the zero nominal growth approach and the Secretariat should therefore present proposals based on the real needs of the Organization and inform the Assembly of the actual total of resources allocated for 2006 2007.

Fear over the growth effects of the European Central Bank s 2006 rate increases is based on confusion between real and nominal interest rates. By the end of the year, European interest rates will have been raised 150 basis points (to 3.5 , from 2 in January).

In Switzerland and Denmark, investors want exposure to a currency that is expected to appreciate in nominal terms. If you were holding Swiss franc assets at a negative nominal return right before its central bank abandoned its euro peg in mid January, you could have made a 20 return overnight a negative nominal return is a small price to pay for a large capital gain.

In other words, negative nominal rates merely make your return more negative than it already was. Investors accept negative returns for the convenience of holding cash balances, so, in a sense, there is nothing new about negative nominal interest rates.

Food provided in government hospitals is either free of charge or at a very nominal rate.

Similarly most pathology facilities such as blood tests are done for free or at nominal cost.

The bitter medicine that Germany and the ECB want to impose on the periphery the second option is recessionary deflation fiscal austerity, structural reforms to boost productivity growth and reduce unit labor costs, and real depreciation via price adjustment, as opposed to nominal exchange rate adjustment.

But such adjustments cannot happen in a monetary union, so unit labor costs are slowly re converging via a protracted process of flat nominal wage growth and slowly declining real wages (a process that would be quicker with higher inflation in Germany and Northern Europe). With domestic demand in short supply, this slow road essentially postpones or impedes growth via expansion of the tradable sector.

Photographs will be available to delegations for a nominal fee and to accredited correspondents free of charge.

But that is logically flawed even with deflation, real purchasing power would fall, and the real value of debts would rise (debt deflation), as the real depreciation occurs. More importantly, the exit path would restore growth right away, via nominal and real depreciation, avoiding a decade long depression.

Greater economic openness, coupled with the fixed nominal exchange rate, ended China s inflationary roller coaster ride, and, after 1994, real GDP growth also became more stable. The government is now seeking to decontrol domestic interest rates, create a more robust domestic bond market, and finally remove capital controls.

These countries had already lost export market shares to China and other low value added and labor intensive Asian economies. Then a decade of nominal wage growth that out paced productivity gains led to a rise in unit labor costs, real exchange rate appreciation, and large current account deficits.

The change can be measured by real exchange rate appreciation, which consists partly in nominal renminbi appreciation against the dollar, and partly in Chinese inflation. China s government should have let more of the real appreciation take the form of nominal appreciation (dollars per renminbi).

The zero lower bound arises because nominal interest rates cannot fall below zero. But if nominal interest rates stay positive, while inflation is negative, then real interest rates may become too high for an economy in recession, causing recession to become more severe and prolonged.

For Greece, with an overall deficit of 4.1 of GDP and a debt GDP ratio of 170 , the debt ratio would fall if the combination of inflation and real (inflation adjusted) GDP growth exceeded 2.4 . Stated differently, now that Greece has achieved a zero primary budget deficit, its debt burden will decline if its nominal growth rate exceeds the average interest that it pays on its government debt.

Yet there are reasons to fear that there will be such a decline slower growth means fewer competitive pressures for heightened efficiency diminished risk tolerance means a lower appetite for innovation and experimentation and nominal interest rates pinned at the zero lower bound means that society s savings cannot be used effectively.

Given the depreciation of the United States dollar against the euro over the past two years, the near zero growth in euro terms leads, in United States dollar terms, to a nominal increase of 22.0 per cent at the time of preparation of this budget proposal (see paragraph 10 above).

Nonetheless, nominal rates do matter. When they are negligible, they flatter profit statements, while balance sheet problems slowly accumulate.

Further, while the nominal figures for increases in ODA are encouraging, they have to be interpreted with some caution.

The figures for ODA are based on concessional transfers with grant equivalence of 25 per cent of nominal flows.

The approved budget for the biennium 2004 represented a nominal increase of 5 per cent from the previous budget.

On the education side, government schools for both girls and boys are free of cost or change nominal fees.

When you hold a checking or current account in your bank at a zero interest rate as most people do in advanced economies the real return is negative (the nominal zero return minus inflation) a year from now, your cash balances buy you less goods than they do today. And if you consider the fees that many banks impose on these accounts, the effective nominal return was already negative even before central banks went for negative nominal rates.

The experience of Iceland and many emerging markets over the past 20 years shows that nominal depreciation and orderly restructuring and reduction of foreign debts can restore debt sustainability, competitiveness, and growth. As in these cases, the collateral damage to Greece of a euro exit will be significant, but it can be contained.

The second adverse effect of deflation is to raise the real interest rate, that is, the difference between the nominal interest rate and the rate of inflation. When prices are rising, the real interest rate is less than the nominal rate since the borrower repays with dollars that are worth less.

Another major risk of interest rate liberalization in China stems from rising public debt, particularly local government debt, which has grown significantly in the wake of the global financial crisis. A key parameter for determining the long run sustainability of public debt is the gap between interest rates and the nominal GDP growth rate.

At the very least, the combination of higher interest rates in the shadow banking sector and weaker nominal GDP growth undermines borrowers debt repayment capacity. In a worst case scenario, falling property prices or diminishing faith in implicit government guarantees would compound the risks generated by the shadow banking system, severely undermining China s financial stability.