How to Dealing with Debt

The current– potentially temporary - respite in the financial crisis is allowing governments to take stock of the impact of rescue packages on public finances. We know that in 2010 the debt of the richer members of the G20 is expected to rise close to 100% of GDP. Tough choices will be required on how to service the interest payments and bring down the size of the debt burden. Policy options are limited and potentially unpopular. Cuts in public spending, reducing public sector workforces, higher taxes and encouraging inflation are the most likely instruments. These will have a dampening effect on the economy and slow the pace of recovery. It will be interesting to see the choices made by different nations. The impact will be severe on public sector suppliers – consultants, lawyers and other servi ce providers could experience some of the biggest cutbacks. Redundancies in these firms will be an inevitable consequence.