Friday, April 23, 2010

Wish You Were Here?


My fellow citizens, I am speaking to you from a luxury hotel far, far, away from the riots

So Greece has finally bowed to the inevitable. After its latest credit downgrade yesterday, and with its government bond yields soaring towards double digits, it's called in the IMF.

But what the Greek government still hasn't spelled out is just how its going to balance the books. Sure, it's taking the €45 billion loan, but what precisely is going to be axed? With riots already underway, axing is going to prove more than a tad tricky.

Of course, we don't need to worry because we're not Greece.

Good heavens, no.

By no means.

For one thing... umm... er... Ah, yes, we're so much bigger than they are. That's it. So whereas they owe £260bn, we will soon owe £1.4 trillion.

No, no... that's not quite right... umm... our economy's so much bigger. Yes, that's it. We're in much better shape because we have a bigger economy.

Althooough... even taking account of our bigger economy, we do have a worse structural deficit than them:


And come to that, their government debt in relation to GDP is not so much lower than ours. According to the OECD, by 2011 theirs will be around 100% of GDP, compared to 70% for us.

In truth, the only thing that's stopped us getting into the Greek soup already is that we're not in the Euro. Lashed to the Germans, we wouldn't have been able to take the easy way of 25% currency depreciation, and we wouldn't have the safety valve of another slide if the markets decree.

Unfortunately, while currency depreciation may stave off the bailiffs for a while, it does so only by making each and every one of us poorer through the inflation tax on our imported goods.

Not to mention the spiralling cost of our Greek holidays.

PS From now until the election, blogging is likely to be sporadic. Like all good men,Tyler is going to the aid of the party. The Clegg effect seems to be opening all kinds of nightmarish possibilities in the leafy glades of Surrey, and the Major and I are hitting the pavements.

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