LINK para o artigoThe worst global economic storm since the 1930s may be beginning to clear, but another cloud already looms on the financial horizon: massive public debt.
Investors have been fretting on both counts. Worries about default have been focused on weaker countries in the euro area, particularly Greece, Ireland, Italy, Portugal and Spain, where the single currency removes the option of unilateral inflation.
What should policymakers do? A sudden fit of fiscal austerity would be a mistake.
The next step is to boost the credibility of these principles with rules and institutions to reinforce future politicians’ resolve.
All this is a tall order. Politicians have failed to control the costs of ageing populations for years. Paradoxically, the financial bust, by adding so much debt, may boost the chances of a breakthrough. If not, another financial catastrophe looms.
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