THE DAILY TELEGRAPH: Larry Summers, President Obama's chief economic adviser for his first two years in office, has labelled Britain's plan to revive growth by tackling its deficit as "oxymoronic", in an unusually outspoken attack."I find the idea of expansionary fiscal contraction in the context of the world in which we now live to be every bit as oxymoronic as it sounds," Mr Summers told a gathering of economists and policy makers at the resort of Bretton Woods in New Hampshire.
The analysis from Mr Summers, who also served as US Treasury Secretary under President Clinton, will be unwelcome to a Coalition government that's pushing through tax increases and cutting spending.
The government insists that tackling the budget deficit is required to prevent bond investors losing confidence in the country's fiscal policy in the way they did with Greece and Portugal and have threatened to with Spain and Italy.
In last month's Budget, George Osborne, the chancellor of the exchequer, outlined plans to cut the budget deficit, which has reached 10p of gross domestic product (GDP), to £29bn in 2015 from £146bn this year.
Though it has damaged the Government's rating in the opinion polls, the policy has won the backing of business leaders in the UK who are now tasked with helping to drive the recovery.
However, Mr Summers said he was sceptical that a policy focused on improving "fiscal hygiene" would generate the confidence a recovery needs. "I'd be happy to say that if Britain enjoys a boom for the next two years from increased confidence," I will change my opinion, he said.
The attack from Mr Summers underlines the extent to which many in Washington DC are watching Britain to see whether the government's effort drives the economy back into recession or helps lays the foundation for a lasting recovery. » | Richard Blackden, US Business Editor | Saturday, April 09, 2011
