The Organisation for Economic Co-operation and Development (OECD) is pressurizing the UK government to formulate a realistic and strong plan to deal with the UK budget deficit. The OECD believes that this plan should in no way disturb the thrust that is driving the economy right now.
The UK government is also deliberating reductions in public sector investments. Such a move might curtail the economic growth, but it will also help the government tackle the problem of inflation. Those arguing for this strategy believe that inflation could become a major concern in the short to medium term, leading to a surge in the interest rates towards the end of 2010.
Recently the government had announced public-sector investment reductions adding up to £6.2 billion. However, experts believe that this amounts to only 10% of the total reduction necessary. Chances are also rife that UK might lose its AAA rating in the credit markets. This would shake the confidence of investors in the UK market and also increase the cost of tuning up the present debts and generating new finances in the future.
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