Bank Of England Chief: The US Faces The Same Issues As Greece, And Europe Has Only Kicked The Can Down The Road

mervyn king

Photo: Bank of England

Lost in the shuffle over the past 24 hours were some surprisingly stiff comments from Mervyn King, the head of the Bank of England.The Telegraph flags some of the interesting comments he made at a press conference, following the release of the BoE’s latest inflation report.

Particularly notable is his warning to US and UK governments about debt

Every country around the world is in a similar position, even the United States; the world’s largest economy has a very large fiscal deficit. And one of the concerns in financial markets is clearly – how will this enormous stock of public debt be reduced over the next few years? And it’s very important that governments, both here and elsewhere, get to grips with this problem, have a clear approach and a very clear and credible approach to reducing the size of those deficits over, in our case, the lifetime of this parliament, in order to convince markets that they should be willing to continue to finance the very large sums of money that will be needed to be raised from financial markets over the next few years, at reasonable interest rates.

As for the Greek bailout, you can put him in the “kicking the can down the road” camp

…within the international community I think there is a very clear understanding that the package of financial support which was made available at the weekend is not an underlying solution to the problem. It provides a window of opportunity which gives governments the chance to put their house in order; and it gives the international economic community a chance to talk about what I think – and have always said for some considerable time – to be one of the major issues facing us, which is the need to rebalance demand around the world economy.

You can download the whole transcript here from the BoE.

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