Report
Should we be concerned about fiscal deficits?
The United States, the United Kingdom, France, Italy and Japan all have very large fiscal deficits. Should we be worried about these deficits? Could they lead to a financial crisis? Fiscal deficits should be a source of concern if they: Lead to real long-term interest rates that exceed potential growth; Lead to a crowding-out of corporate investment; Result from government transfer payments to households and not from spending that boosts GDP; Lead to a current account deficit that cannot be financed by capital inflows. The fiscal deficit may be cause for concern in: Italy (real long-term interest rate higher than potential growth, low investment rate); The United Kingdom (low investment rate) ; France (fiscal deficit due to large public transfer payments).
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Natixis
Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.
Patrick Artus
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