At the heart of the recent turmoil in Britain lie two major dilemmas. The way they are unfolding is instructive for all advanced economies, which are suffering some of the same global effects, Japan included.
The first dilemma is financial and the second is political. The financial one arises from the simple fact that the U.K. has suffered three major blows in recent times — one might describe them as illnesses — all of them very severe and unforeseen: the pandemic, the energy price explosion and a nasty war in Europe.
Each one of these events has had the effect of making truly massive demands on public finances and therefore on borrowing. The U.K. government's borrowing at 97% of gross domestic product is at the highest level for decades. It is not as high as some other major countries (Japan for example), but for a nation that lives by its reputation for financial acumen and stability, it is far too high. It just has to come down before big fresh demands are made on the economy.
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