"Unlike economists and politicians, markets have no ideology. As long as they make money they do not care if they have to eat their words. They simply want whatever “works”—whatever will produce a stable, healthy economic environment conducive to debt repayment. When circumstances become dire enough, they will even condone debt restructuring—if the alternative is chaos and the prospect of a greater loss.
This opens up some room for governments to maneuver. It permits self-confident political leaders to take charge of their own future. It allows them tothe narrative that underpins market confidence, rather than play catch-up.
But to make good use of this maneuvering room, policymakers need to articulate a coherent, consistent, and credible account of what they are doing, based on both good economics and good politics. They have to say: “we are doing this not because the markets demand it, but because it is good for us and here is why.”
Their storyline needs to convince their electorates as well as the markets. If they succeed, they can pursue their own priorities and maintain market confidence at the same time."