The markets are currently a fast-changing place. Here, experts give their take on how to manage money in an environment shaped by the deficits of the “rich” worldby Jim O Neill / August 24, 2011 / Leave a comment
Published in September 2011 issue of Prospect Magazine
In view of the considerable fiscal challenges facing both Europe and the US, it is not surprising that investors are searching for alternatives. In addition to providing much better potential for long-term real gross domestic product growth, those countries that I refer to as Growth Economies—the four BRICs, Brazil, Russia, India and China, along with Korea, Indonesia, Mexico and Turkey—all have dramatically better fiscal positions and considerably lower government debt.
One way of thinking about it would be in terms of the Maastricht Treaty, which before 1999 was supposed to determine countries’ fitness for membership of the European Monetary Union. Countries were only allowed to join if they had budget deficits at or below 3 per cent of GDP and government debts that were 60 per cent of GDP or less, or were heading in that direction.
Right now, Finland would be the only eurozone country to meet the Maastricht criteria. Britain, the US and, of course, Japan certainly do not. Among developed world nations only Australia and Sweden would sit alongside Finland.