Robin, cutting the public deficit is a central issue in the UK general election campaign that is running at the moment, but is it also an issue around the globe and to what extent do public spending cuts threaten to choke off recovery?

But unfortunately, given the scale of deficits we see around the world, you're going to see tax rises pretty much everywhere as well and in some countries you're going to see more tax rises than spending cuts.

Certainly fiscal consolidation is a global theme, but many markets are talking about taxes rather than spending in order to achieve that. But I can't think of many rich countries that aren't in a position where you're going to see significant tightening over the next few years.

So what you want to do is gradually remove the crutches from the patient but not so quickly that they just fall flat on their face and that's the big worry right now.

So how quickly can you consolidate? In the UK one big political theme is do you do all the cuts right after the election or do you wait until 2011/2012? So the Liberal Democrats and Labour looking to do everything next year, the Tories at the moment slightly unclear but looking probably to do a bit more this year. So their sense is the recovery is a bit more robust.

But clearly, if you remove government spending, or put higher taxes in, that will unambiguously make the economy weaker than if you weren't doing that. Now clearly, there is a little bit more of a nuance to public spending, drives up longer term interest rates and that crimps the private sector's ability to borrow.

But I think in all reality, clearly, as you pull out public stimulus, it's going to lead to the economy struggling rather more than it is at the moment and I think we need to be realistic that what that suggests is that fiscal consolidation is a must. It has to happen because if you don't see that, then money markets are going to get out of control, higher interest rates and the economy is going to look very sick indeed.

But that withdrawal of the stimulus means that the recovery is going to be much, much weaker than anything we've experienced in recent recessions and upticks during the cycle and I think we just need to be braced for the fact that not just in the UK but in Europe, Japan and even in America, the recovery is going to be a lot weaker than people are hoping.

So if they see a little bit of tightening now, but there is a very credible story about how there is going to be much more coming down the pipe back in 2011, I think that's okay.

Lots of tightening now I think you could snuff out the recovery because it simply isn't that strong. But no tightening now and no story about what's going to happen in 2011 is equally bad because then you're going to see sterling fall through the floor and interest rates go through the roof.

So I think the really key thing is a credible story and of course politicians struggle to put together credible stories about spending cuts and higher tax and so to me, that's the really difficult bit. You probably have to put something into effect now just to make the markets clear that you're serious about doing more in 2011.

But I do think that they have got a serious problem. When you look at their economy and clearly their fiscal position is appalling, much worse than other OECD economies, certainly in terms of the debt stock if not in terms of the size of the deficit, so their room for manoeuvre is pretty limited. They're moving into old aging population. Trend growth is extraordinarily low because the population of working age is already shrinking quite sharply. So for them, it's very, very difficult to see where the growth is going to come from.

Our worry is there that having spent 15 years really dodging the bullet in terms of this terrible fiscal situation and really starting to weigh on their economic prospects and on what financial markets think about them, they're gradually moving in towards a situation where they're going to need foreign funding to support the fiscal deficit which hasn't really happened before. I think it is just going to get more and more difficult for them.

So a very, very problematic picture when you look out not just over the next couple of years, but actually over the next 10 or 15 years. I think very, very tough.

And if you look in terms of fiscal deficits, obviously you need to look to the periphery, but Greece clearly, Spain, Ireland. They've got much worse fiscal deficits than Japan, although not much worse debt stocks.

So if you look, I think, in the short-term, all looks pretty difficult in Europe. No growth in the really big economy, terrible fiscal situation. It's so terrible that we are seriously talking about a bailout and if we were talking about that, you could be talking about default. I think that's very unlikely, but bailout looks almost certain now.

So the short-term looks terrible, but I think when you look out into the long-term, Europe has a lot more levers to pull to get their economy moving again. They actually have a lot more goodwill in the financial markets, a lot more slack to make structural changes to their economy whereas Japan, they've left it far too late. Inaction for far too long now means that for them there are no good options whereas in Europe you can imagine that in a couple of years' time Germany will be going robustly again, that the Greek fiscal position will be on a downward smooth and you'll get confidence that the long run picture is better there whereas in Japan it's very difficult to feel like that.