“My great concern with Donald Trump is that his economic pronouncements don’t square up,” Varoufakis said in an interview with Bloomberg TV’s Guy Johnson.
Varoufakis said Trump’s proposed $1 trillion (£830 billion) government spending plan “is unfunded and will lead to skyrocketing deficits if he succeeds with all the tax cuts he wants to push through.”
At the same time, diplomatic tensions could lead China to sell its holdings of US Treasurys, pushing up bond yields and making it more expensive for Trump to fund the plan by borrowing on the international capital market.
It’s a sequence that echoes the European debt crisis, which started in 2010 when investors lost confidence in the ability of Greece and other southern European countries to fund government spending and pay back their national debt. That led to higher government borrowing costs, a series of banking crises, and sharp cuts in spending and economic growth.
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