Answering to BBC corresponden Stephanie Flanders about the Bank's ability to maneuver when it comes to managing popular inflation governor of the Bank of England Mervyn King particularly answers that the large public debt is not only an issue in the United Kingdom or in Europe. "Every country around the world is in a similar position, even the United States; the world's largest economy has a very large fiscal deficit. And one of the concerns in financial markets is clearly - how will this enormous stock of public debt be reduced over the next few years?"
Then the chief of the Bank of England continues talking about how important it is for the governments to manage the problem of public debt. He says a "very clear and credible approach" is needed to reduce the size of this public debt in a short period of time, referring to the lifetime of this current British Parliament. King says if we fail to assure the markets on the issue of debt management, we will not be able to convince the markets to finance large amounts of money needed for big projects. He says we can't get money from the markets "at reasonable interest rates."
Governor's remarks came at a press conference following the Bank of England's May 2010 Inflation report.
He also stresses the need for the fiscal union within the Euro if the single currency is to survive. "I do not want to comment on a particular measure by a particular country, but I do want to suggest that within the Euro Area it’s become very clear that there is a need for a fiscal union to make the Monetary Union work. But if that is to happen there needs to be also a mechanism to enable other countries that have lost competitiveness to regain competitiveness," Mervyn King says.
Fiscal deficit is the "single most pressing problem facing the United Kingdom," King said calling for reforms and united action.
The chief of the Bank of England is one of the most guarded policymakers in British banking and in the central banking circles around the world. Thus, his all of the sudden speaking with a sense of urgency leaves and impression that King is unleashing, writes The Telegraph.
Written by Armen Hareyan