Key takeaways: Goldman Sachs executive Anthony Guttman says governments need to compress spending and boost economic growth to counter soaring borrowing costs.
He said rising yields are a common problem facing Western economies, and specifically mentioned recent violent swings in the U.S. Treasury and French government bond markets.
Guttman believes that Europe's entry into an election cycle has intensified policy uncertainty, making fiscal trade-offs even more difficult.
Anthony Guttman, co-chief executive of Goldman Sachs International, said on Monday that curbing soaring borrowing costs requires a more stable policy environment, with the core being lower government spending and stronger economic growth.
Speaking on the "European Financial Forum" program, Guttman said higher government bond yields are a challenge shared across the Western world, and he highlighted recent market turbulence in U.S. Treasuries and French government bonds.
"We all know the drivers behind this. Everyone is watching energy costs and the labor market. But fundamentally, what needs to be done to solve this problem? We need to narrow fiscal deficits while achieving more sustainable economic growth," Guttman said.
Although September nonfarm payroll data came in below expectations, U.S. Treasury yields remained high on Friday; on Monday, the 10-year U.S. Treasury yield fell 1 basis point to 5.2581%.
The French 10-year government bond yield rose more than 1 basis point to 4.8812%.
In an interview with host Steve Sedgwick, Guttman said governments always face trade-offs when making decisions, but the current fiscal environment makes solving these problems even harder.
Just as Spanish Prime Minister Pedro Sanchez announced an early election on November 29, Guttman warned that Europe's election cycle is bringing more policy uncertainty and instability to business operations.
"But I hope to see a situation where spending cuts are combined with faster economic growth. If that can be achieved, it will reassure all market participants."