Global economic growth in 2011 is forecast to be lower than 2010, with momentum fading, rather than building. Meanwhile, on Sunday, Jean-Claude Trichet, president of the European Central Bank (ECB), dismissed fears that Europe is facing a double-dip recession after last week's global manufacturing data coupled with US consumer confidence, housing and jobs data, raised concerns about the global recovery and the signalled continued fragility in the American economy - - the world's biggest.

Developed countries are expected to reduce their emergency stimulus sharply in 2011 compared to this year, reducing global growth by a 1.25 percentage point, according to the Institute of International Finance (IIF)  - - a global banking industry group, which has more than 375 members headquartered in more than 70 countries.

The IIF said in its current newsletter, Global Economic Monitor, that globally the second quarter of 2010 will “probably be the high-water mark for growth over the next 18-24 months.” 2011 will be a year of “significant, synchronized fiscal tightening. This tightening will not be one-off. 2011 will be year one in an extended phase of fiscal tightening in mature economies.”

In 2009 and 2010, stimulus spending in the Group of 20 (G-20) industrialised countries amounted to about 2% of GDP, the IIF estimated. The contraction resulting from fiscal tightening can be offset somewhat by expansion elsewhere in the economy. Overall, the IIF expects global growth to decline to 2.7% in 2011 from 3.4% this year.

Jean-Claude Trichet said on Sunday, that he did “not believe at all,” that Europe was facing a double-dip recession but he warned there was a “huge” amount of work to do for the G-20 countries to regulate the financial sector and that global economic imbalances must be reduced further.

“We see structural reforms as fundamental if we want to increase the economic growth potential of Europe,” he told reporters covering the annual Rencontres économiques economic conference in Aix-en-Provence, France.

The ECB president reaffirmed his opposition to the idea of Europe-wide debt issuance to boost growth.

“I have no positive view of such an idea. We are in a period where we have to manage very carefully all the budgets,” he said.

On Saturday, Trichet's colleague on the ECB's executive board, Gertrude Tumpel-Gugerell, said in a speech in Shanghai that structural reform measures which increase competition in the consumer markets can curtail monopoly rents and lead to higher employment and output. She said the introduction of the Single Market, for instance, has - - according to estimates, decreased monopoly rents by a quarter. Studies have also found that this may have increased potential output in the range of 5 - 10%. Also labour market reforms, such as for instance an adjustment of the unemployment benefit replacement ratio by 5 percentage points has been estimated to give rise to 1.5% more output and 1.7% more employment over a period of 5 years.

Tumpel-Gugerel asked: "Will these consolidation efforts have a negative impact on growth?"

She said: "In the short run, the effect will very much depend on the economic outlook and to what extent public demand will be replaced by private demand. Our current estimates foresee some dampening impact on growth, but not a very significant one, depending on the fiscal instrument that is used. In the long run, however, the benefits of fiscal consolidation prevail.

An illustrative analysis of multi-year fiscal consolidation programmes conducted by our experts which we have published in the July edition of our Monthly Bulletin (it is in the current June bulletin, page 83) suggests that the long-term economic gains of restoring sound fiscal positions in the euro area outweigh by far the short-run costs. According to model simulations, long-run benefits of a permanent reduction in the euro area debt-to-GDP ratio over the years from 90% to 60% are generally in the range of 0.4-2.2% of initial steady-state real GDP."

Tumpel-Gugerel added: "Each country needs to live up to its responsibilities, and European governments need to work together. This goes hand in hand with the conclusions of the G-20 meeting in Toronto last weekend, where the G20 economies committed to fiscal plans that will at least halve deficits by 2013 and stabilize or reduce government debt-to-GDP ratios by 2016. This should support a sound, longer-term economic recovery on a global level."

The exporting strength of Germany, the biggest economy in the Eurozone, continues to support growth.

CNBC's Rick Santelli squares off with colleague Steve Liesman, on government spending and taxes:

Last week, the German engineering sector which employs over 900,000, reported a 61% increase in orders year-on-year in May.

Manfred Wittenstein, president of VDMA, the German engineering association, said it had increased its production forecast for 2010 from a zero increase to one of 3% and Commerzbank revised its German GDP forecast for this year to 2.5% from 1.8%.

On Sunday, background papers issued in Berlin on the details of the recent four-year planned €80bn fiscal adjustment, signal that most of the adjustments will come from spending cuts rather than tax increases.

The German Constitution mandates a maximum structural deficit of just 0.35% of GDP (gross domestic product) by 2016. There is a get-out clause in emergency situations.

US private sector employers added 83,000 jobs in June bringing the total increase this year to close to 600,000, according to data released on Friday.

The US has now shed 7.5m workers since the economy went into recession at the end of 2007. The economy must create over 100000 jobs per month just to keep up with population growth, never mind bringing down unemployment.  

JP Morgan Chase economists on Thursday, cut economic projections, saying in a note to clients that market turmoil and Europe’s government debt problems have been “weighing on the economy: export orders tanked, confidence has stumbled, and the hit to households’ equity wealth is becoming a considerable impediment to consumer spending.”

The economists reduced the estimate of second quarter GDP  growth to an annualised 3.2% from 4% and also cut their third quarter GDP forecast to 3% from 4%, and warned that their inflation forecast might need to come down too.

On Friday, UBS economists reduced their second quarter growth estimate to 3% from 3.5% and cut their forecast for the second half of the year to 2.5% from 3%. On a hopeful note, UBS said, “recent interest rates are much lower than we have been expecting - - an important factor supporting some stabilization and moderate housing recovery in coming quarters.”

Congress has failed to extend the emergency unemployment benefits that expired on June 1st. More than a million unemployed workers have already seen their benefits lapse and 200,000 people are expected to lose their benefits with each passing week that Congress does not act.

The number of long-term unemployed - - people jobless for 27 weeks or more - - was largely unchanged at a record 6.8m, according to Friday's Bureau of Labor Statistics data. These jobless people make up 45.5% of all officially unemployed workers --  adding the 8.6m part-timers for economic reasons (sometimes referred to as involuntary part-time workers) and about 2.6m persons who are marginally attached to the workforce, brings the broad measure of unemployment to 16.5%.

Many employers require a credit check for new employees and the longer the period of unemployment the greater the risk of credit impairment.

Republicans in Congress are stoking public fears of rising public debt while President Obama and the Democrats are imperiling support for additional short-term stimulus measures by failing to push a plan for long-term debt reduction. The president's budget director, Peter Orszag, is leaving the administration, this month.

The non-partisan Congressional Budget Office’s (CBO - - Orszag,used to be its head) said last week that US public debt is on course to exceed 100% of GDP in 2025 and to reach 185% of GDP in 2035.

At the end of 2008, that debt equaled 40% of GDP - -  a little above the 40-year average of 36%. Since then, large budget deficits have caused debt held by the public to shoot upward; CBO projects that federal debt will reach 62% of GDP by the end of this year - - the highest percentage since shortly after World War II.

There is neither appetite for tax increases or spending cuts.

It would be easy to blame the politicians but the public want to have their cake and eat it.