(James Saft is a Reuters columnist. The opinions expressed are his own)

By Jim Saft

HUNTSVILLE, Ala., June 8 (Reuters) – It may be folly or it may be prudence, but the move to fiscal austerity and restraint will be deflationary, will be bad for risky asset prices and will raise further the threat of protectionism.

The weekend’s meeting of the Group of 20 wealthy nations in Korea ended in a muddle of policies, with the final communique appearing to praise fiscal retrenching, expansionary policy, tighter regulation and slower implementation of that tighter regulation all at the same time, and all in the same impenetrable thicket of euphemism, buzzwords and consultant-speak.

To wit:

“The recent events highlight the importance of sustainable public finances and the need for our countries to put in place credible, growth-friendly measures, to deliver fiscal sustainability, differentiated for and tailored to national circumstances. Those countries with serious fiscal challenges need to accelerate the pace of consolidation. We welcome the recent announcements by some countries to reduce their deficits in 2010 and strengthen their fiscal frameworks and institutions. Within their capacity, countries will expand domestic sources of growth, while maintaining macroeconomic stability,” the communique issued at the conclusion of the meeting read.

For the perplexed, a gloss would be: “Europe having hit the fan, we can no longer agree on common policies to stimulate the wretched economy. Every man for himself! Well, except for the U.S., which should carry on buying all of the rest of our stuff.”

China is not taking serious steps to revalue its currency, deciding instead to fight inflation and an overheating property market at home. And over in Europe, if it isn’t French Prime Minister Francois Fillon praising the “good news” of a newly cheap euro it is German Chancellor Angela Merkel unveiling a package of budget cuts. Just as fiscal stimulus must be done in concert internationally, as some of the benefit of the money spent will “leak” through borders, so is austerity a bit of a communicable disease; you may be punished by markets if you are the one still expanding borrowing while others cut.