ACTING decisively with financial stimulus when the banking crisis hit will not be enough to stop the West experiencing a ‘lost decade’ of its own if it is not careful, according to British financier Guy Hands.

The boss of private equity giant Terra Firma (pictured), who moved to the island full-time in April, told guests at this year’s Institute of Directors dinner that the circumstances surrounding countries such as the US and the UK now were very similar to those being faced by Japan 20 years ago.

It was Mr Hands’ first public appearance in the island since his well-publicised departure from the UK, a move described by the national media as a protest against the introduction of the new 50% UK tax rate for high earners.

Mr Hands said the implementation of a massive fiscal stimulus by economies in Europe and the US, despite high debt levels, had had a positive impact so far, but more issues needed to be addressed to ensure the same problems Japan suffered would not be repeated closer to home.

‘This [fiscal stimulation] has certainly made a difference in the short-term, as the Western economies have shown signs of life in the last several quarters. If the West had done nothing, it might well have followed Japan into a similar deflationary spiral.’

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