Front pages of many of Tuesday's newspapers talked of the Euro being "under siege" and facing an "unprecedented crisis". The Daily Telegraph in particular ran several in depth articles focusing on Europe's latest economic problems. The Irish government is facing growing pressure to accept a massive financial bailout from EU though it has said it does not need any help. But the Telegraph reports Ireland had begun preliminary talks over its debt problems.
Ireland is just the latest in a series of woes. The Greek economy is virtually collapsing and millions of Euros have been pumped into the country. And yesterday it was disclosed that the country's economic problems are much worse than previously believed. There are concerns too that Portugal and Spain may soon be asking for financial help [Telegraph].
As European finance ministers headed to Brussels to discuss a new European stability plan there were warmings that of the seriousness of the situation coming from leading politicians. German Chancellor Angela Merkel echoed the words of the EU president saying, "If the euro fails, then Europe fails."
But Ireland's minister for European affairs has urged EU finance ministers not to panic over the country's economic problems, insisting there was no need to resort to a bail-out. Dick Roche said that the markets were "not reacting rationally" to Ireland's debt difficulties and insisted that the country's stringent austerity measures were working as planned [Telegraph].
Austerity measures have been implemented in Britain and across Europe to deal with massive deficits that have hung over from the global economic downturn. But the cut backs have not been accepted graciously by large sections of society. In Greece there have been strikes and widespread disorder. In France too proposals to raise the pensionable age brough the country to a virtual standstill. And in Britain there is also growing discontent. A student demonstration descended into violence last week and many people expect further troubles in weeks to come.
Portugal has admitted it may need an EU bail-out. If it does, it will be the latest in a collection of the most vulnerable European member states known the PIGS [Portugal, Ireland, Greece and Spain] to ask for help.
Portugal's deficit is €15.7 billion accounting for 9.3% of the country's GDP. The government also has debts of €127.9 billion, more than 76% of GDP. In comparison Ireland's deficit is €22.9 billion, 14.4% of GDP and the government debt is in excess of €104 billion.
Greece have a deficit of €36.1 billion, 15.4% of GDP, and a government debt of €288 billion accounting for 126.8% of the country's GDP. Spain has the largest deficit of the PIGS standing at €117.3 billion though this is only 11.1% of its GDP. But it has government debts of more that €560.5 billion, or 53.2% of Spain's GDP.
Brussels recommends an annual budget deficit no higher than 3% of GDP. This includes the sum of all public budgets, including municipalities, regions and so on. It also advises that countries hold a national debt lower than 60% of GDP.
The news that the Euro might be in trouble may please some Euro-sceptics but Britain will be severely affected by a collapse of Europe's economy. David Cameron said he was "thankful" that Britain had not joined the euro, but indicated his displeasure that taxpayers faced a £7 billion [€8.25 billion] liability in any bail-out package. Meanwhile, veteran Conservative MP Peter Tapsell warned that the "potential knock-on effect" of the Irish crisis "could pose as great a threat to the world economy as did Lehman Brothers, AIG and Goldman Sachs in September 2008".
Britain is far from being economically stable either. Government debt has passed £903 billion [€1,065 billion], equivalent to 62.2% of GDP. the highest since records began in 1993 [Guardian / Govt Statistics / Eurozone in crisis - charts BBC]
Writing in the Telegraph, Jeremy Warner says Britain should not be complacent nor gloat at Europe's woes. "Any disorderly disintegration of the euro could plunge all of Europe into prolonged depression, destroying Britain's nascent recovery and with it the Coalition's plans for deficit reduction," he says. "In such circumstances, Britain too would be vulnerable to debt crisis and punishingly [sic] high interest rates." [Telegraph]
Even as austerity measures take effect, it will be a long time before Britain is out of the woods. Today it was announced that UK inflation had risen to 3.2% in October, though the retail price index had fallen to 4.5%, the lowest since march [Sky News / Guardian / BBC].
The negative news was kept from most however as many news channels revelled in the news that Prince William and Kate Middleton are to marry. While early reports in the day focused on the economic news the breaking news at 11 am that a Royal wedding was in the offing soon filled the airwaves with wall-to-wall coverage on the happy couple which the BBC described as "the big story of the day". Nothing like a Royal wedding to bury bad news. "Hopefully it's going to lift us all we all these cuts and everything. I know they're necessary but it's so depressing," one Londoner told BBC News outside Buckingham palace.
tvnewswatch, London, UK
1 comment:
I am very optimistic about Europe's economic recovery. Although it might still take some years but its gonna happen for sure.
European recovery
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