IMF sounds alarm on rising government borrowing costs – business live

Rolling coverage of the latest economic and financial news Global financial system is failing developing countries, says Ed Miliband Pressure to increase defence spending is another factor pushing up government borrowing – and European countries may need to fund it through spending cuts rather that higher taxes or borrowing, the Fund indicated.

Speaking today in Bangkok, Rodrigo Valdes , head of the IMF’s fiscal affairs department, told reporters: “I think what countries should do from the macro perspective depends a lot in terms of their initial position.

In general, however, the the defence spending will be persistent, so even if you accommodate it temporarily with debt, you have to be prepared at some point to recognise that that debt cannot forever finance this part.

And the second issue is that...in general, Europe has really high revenue ratios.

So the space for a lot more revenues is not easy: it distorts, at the end of the day.

So, the discussion about the social contract behind spending is very, very urgent.” “Given the fact that many of these spending pressures are going to be persistent, there are going to be difficult trade-offs, and countries are going to have to assess carefully, in communication and dialogue and discussion with the public, in terms of what the priorities are, what needs to come first, and what governments need to spend on.” Continue reading...