Economists fear 'global bond trap'

Economists warn fiscal belt-tightening in Europe may exacerbate imbalances in the global economy, leading to sluggish growth and excess liquidity in government bonds.

US Treasury secretary Timothy Geithner

Fiscal retrenchment will lead to a current account surplus in Europe, contributing to severe imbalances in the global economy, economists have said.

The US, the UK and other European countries have run large budget deficits over the past decade, spending too much and saving too little, while net exporters – Japan, Germany and China among them – have accumulated current account surpluses through high savings rates and low consumption.

At a G-20 conference held in Busan, Korea on June 4-5, US

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