In particular, we have seen unsustainable increases in fiscal deficits and debt ratios in a number of advanced economies. For example, fiscal deficits in the United Kingdom, Greece, Ireland and the United States are expected to exceed 10 per cent of GDP in 2010, What happens when these fiscal stimuli are withdrawn is critical.
Much depends on whether the consumers in these countries are in a position to take up the slack. The answer is not clear cut, and will differ in various countries. In the US, the latest indications are that retail sales are rebounding and the consumer appears to be recovering.