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Finding the right exit
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Finding an appropriate exit strategy from fiscal stimulus policies represents a key challenge for governments and authorities around the world this year, according to the head of Bank of New York Mellon's fixed income specialist company, Newton Investment Management, Paul Brain.
Brain has used his latest analysis to suggest that 2010 will be the year of exits and that just like the Greeks at Thermopylae in 480 BC, the emphasis for governments will be on covering their exits.
He said that while the enormous fiscal and monetary policy efforts of 2009 appeared to have been sufficient to turn the world economy around, the bill for previous excesses still needed to be paid.
“The tricky balancing act for authorities in 2010 will be to pay for those excesses while avoiding a capital shortage similar to that which occurred in 1994,” Brain said. “We have argued repeatedly that, saddled with debt, the Western Governments cannot contemplate anything but a fiscal exit.”
Referring directly to the current sovereign debt problem in Greece, Brain said there were two difficulties with a fiscal exit strategy; the first being when to apply the pain and the second being ensuring that markets trust the strategy.
AUTHOR
Mike Taylor
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