"structural deficit is a cause for concern"

Willem Buiter on the U.K. going forward in the FT:

"Even without getting steamed up about the nationalised bank debt, however, the British structural deficit is a cause for concern. For normal cyclical reasons, the operation of the automatic fiscal stabilisers will increase the budget deficit during the next few years. In addition, because the current recession threatens to become a monster, further discretionary fiscal stimuli are expected and appropriate.

But the effectiveness of debt-financed discretionary spending increases or tax cuts depends on the confidence that the domestic and international capital markets have in the capacity of the British government to cut spending and raise taxes in the future, when the economy starts to recover. Based on the experience of the past seven years, that confidence level should be close to nil. When markets fear that a government may not be willing and able to run sufficiently large primary (non-interest) surpluses in the future, when times are good, they will become sceptical about the creditworthiness of that government. Default risk premia on that government’s debt increase and credit default swaps on that government’s debt will become more expensive."

I'm afraid that this is our predicament.