Ex-IMF economist warns on UK debt

| February 8, 2010 | 0 Comments

Former IMF chief economist, Simon Johnson, has warned that the UK’s debt levels should be seen in the same category of highly indebted countries such as Greece.

Mr Johnson’s was speaking to the BBC about the UK’s debt as the G7 finance ministers discussed the crisis in some of the euro zone economies.

Last week, debt concerns in Europe resulted in heavy falls across stock markets. There have been growing fears for Greece - which is the euro zone’s weakest economy.

Greece has the highest debt of the 16-member bloc. Currently, its public debt stands at €300 billion (£268 billion).

Furthermore, there are fears for Portugal after the country experienced a slump in demand for Government bonds.

Meanwhile, the euro hit a seven-month low against the dollar as traders worried that Greece’s Government debt problems could spread to other European countries such as Spain and Portugal.

Mr Johnson told the BBC: “The financial markets are taking a long hard look at the fiscal accounts of all these countries and they don’t like what they see.

“Now Greece is an extreme example - there I think you can see that it’s going to get very messy very quickly - but unfortunately the budget situation in these other countries is also weak.”

He continues: “And I have to add the UK to this list. Unless you can persuade the markets that you’re really going to bring the budget under control within the foreseeable future and you’re going to have some credible actions - and you’re going to have to do some persuading - you’re going to have big trouble.”

Mr Johnson’s comments come just a few days after leading economic think tank, the National Institute of Economic and Social Research, and a report by the Institute for Fiscal Studies, both warned the Government over soaring UK debt levels.

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