Cut spending to curb runaway borrowing costs, Goldman's Gutman tells governments

• Goldman’s Anthony Gutman said governments need lower spending and stronger growth to tackle surging borrowing costs.
• He said rising yields are a problem across Western economies, highlighting recent turmoil in U.S. Treasurys and French government bonds.
• Gutman said Europe’s election cycle is adding policy uncertainty, making fiscal trade-offs harder to manage.

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Follow your favorite stocksCREATE FREE ACCOUNTwatch nowVIDEO8:4408:44Goldman Sachs' Gutman: Election cycle creates 'instability'Squawk Box Europe

A more stable policy backdrop encompassing lower government spending and stronger economic growth is needed to curb surging borrowing costs, Anthony Gutman, co-CEO of Goldman Sachs International, said on Monday.

Speaking with CNBC's "Squawk Box Europe," Gutman said rising government bond yields are a challenge across the Western world, highlighting recent turmoil in U.S. Treasurys and French government bonds.

"We all know what's driving it. We're focused on energy costs, we're focused on the labor market. But fundamentally, what do we need to solve this problem? We need lower fiscal deficits, and we need more durable economic growth," Gutman said.

U.S. 10-Year Treasurys.

U.S. Treasury yields moved higher on Friday, despite weaker-than-anticipated nonfarm payrolls print for September. The 10-year Treasury note yield was last seen 1 basis point lower on Monday at 5.2581%.

France's 10-year government bond was up more than 1 basis point at 4.8812%.

"There are always trade-offs" for governments," Gutman told CNBC's Steve Sedgwick on the sidelines of Goldman Sachs' '10,000 Small Businesses: How Britain Can Win' conference in London on Monday.

But he warned that the prevailing fiscal backdrop makes it "more challenging" to address these problems.

France 10-Year Government Bond.

Speaking just as Spain's Prime Minister Pedro Sanchez announced plans for a snap general election on November 29, Gutman warned that the election cycle in Europe is creating further policy uncertainty and instability for businesses.

"But what I hope we're going to see, which would give us all some comfort on that, is that combination of lower spending and higher growth."

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