If these policies are rolled back too late, fear of a debt spiral and inflation may push up interest rates. On the other hand, if they are rolled back too early, the financial markets may, once again, come under strong pressure. Further stimulus packages may be required.
This balancing act is very much about ensuring investor confidence in the sustainability of the future economic policy. Lack of confidence will cause interest rates to rise, which in turn could trigger a downward spiral of increasing budget deficits and interest costs. This risk could dampen growth, so we need to have a sustainable fiscal consolidation plan.