Jean-Claude Trichet, president of the European Central Bank, warned on Monday that governments should stop concocting new stimulus measures and just get on with the ones they’ve already announced.
And now Mervyn King (pictured) has weighed in with comments which will not be welcomed fulsomely in 10 Downing Street.
King, governor of the Bank of England, made what can only be described as a surprise intervention this morning when he told MPs the recession was ”bound to lead to higher fiscal deficits and it doesn’t make sense to try to offset that”.
He told the Treasury select committee: ”We are going to have to accept for the next two or three years very large fiscal deficits. Given how big those deficits are, I think it is sensible to be cautious about going further in using discretionary measures to expand those deficits.”
This is music to the ears of the Tory party, whose initial caution towards fiscal stimuli – late last year – made them look temporarily isolated.
My colleague Chris Giles (FT economics editor) notes that King is “sailing very close to the constitutional line in providing advice to government.”
UPDATE
10 Downing Street hit back this afternoon by citing Barack Obama’s call for other nations to help “jump start” the global economy. BO writes in today’s International Herald Tribune calling for other G20 partners to take actions to “amplify” the actions of the US.
Jim Pickard
Kiran Stacey
