Britain going bankrupt.

[ItsRobsLife]

October 14, 2009
EU warns Britain and others of rising debt, costs


AOIFE WHITE
AP Business Writer



BRUSSELS (AP) - The European Commission warned Britain and four other EU nations Wednesday that their economies are at high risk because soaring public debt may hurt their ability to meet future needs, such as paying pensions.

It told all EU nations that they could not rely on fast economic growth to reduce debt because Europe faces a problem that will "dwarf the effect of the crisis many times over" - an aging population where fewer workers will pay higher pension and health care for more retirees.

This means that governments have little choice but to make budget cuts and labor market reforms that could raise potential growth, it said.

It highlighted Britain, Spain, Greece, Ireland and Latvia, saying the impact of the downturn on their public finances and growth in the next few years was a "serious concern."

British government debt is swelling at the fastest rate of the Group of Seven industrialized nations and borrowing is forecast to reach a record 175 billion pounds ($277 billion) or 82 percent of gross domestic product next year.

The EU executive said thirteen nations were at high risk and need to set out "ambitious" budget programs to reduce debt and deficit in coming years and to make deep reforms to social welfare spending: Britain, Spain, Greece, Ireland, Latvia, the Netherlands, Lithuania, Malta, Romania, Slovenia, Slovakia, the Czech Republic and Cyprus.

It singled out Greece, where a "very high debt ratio" is coupled with rapidly rising costs for the elderly.

Rising debt in France, Italy, Hungary, Poland and Portugal also came in for criticism. The EU warned that their budget policies are currently "unsustainable" even without counting the costs of aging.

France must make "ambitious" efforts to control the budget, it said. For Italy, Europe's largest debtor, "fast fiscal consolidation once the recovery takes hold is indispensable."

It saw fewer problems for Germany, Belgium and Austria, which have "relatively sound" finances and are in a better position to manage future costs.

The EU executive also warned that "soaring" government borrowing will put upward pressure on interest rates - currently at record lows in the eurozone and Britain - as economies start to recover. This could "crowd out investment," it said.

Last year's financial crisis forced governments to lay out hundreds of billions of euros (dollars) to rescue banks, stoke economic growth and pay out more welfare to the growing number of unemployed while also receiving less tax income.

EU officials are calling on governments to set out an "exit strategy" for how and when they will start paying back debt. Finance ministers from the 16 eurozone nations signaled on Oct. 1 that they might set a 2011 deadline to start such efforts if forecasts confirm a recovery.

"A fast and unsustainable increase in government debt in the coming decades can be avoided," the EU executive said, calling on countries to start paying off debt "as soon as conditions allow it to avoid a more severe correction at a later stage."

Government deficits in all 27 European Union nations are forecast to average 6 percent of gross domestic product in 2009 and 7 percent in 2010 - a massive increase from an 0.8 percent deficit in 2007, the lowest in 30 years.

The crisis has also forced the 16 nations that use the euro to temporarily throw out a budget rule book that requires them to keep deficits under 3 percent and debt under 60 percent. The limits are designed to keep the currency stable.
Thirteen eurozone nations are set to break the deficit rule this year and eight to go past the debt limit.

The European Commission warned that public debt may be worse than expected because "exceptionally large contingent liabilities" - such as guarantees for banks' troubled assets that are promised but not paid out - "may translate into actual costs over coming years."

The EU said Sweden, Denmark, Finland, Estonia and Bulgaria were at low risk because they had healthy public finances before the crisis and have carried out major pension reforms.

[ItsRobsLife]

Certainly draws further attention to the £'s AAA status, if that is withdrawn there will be no going back to the £ as a prefered currency,
which will have much deeper and longer term implications for the UK.

[Spin]

The UK will be ok, but not for a few years. We still have a good few quids worth of North Sea oil and our greatest export.....know how.

Maybe they have to sell off a few assets, as was mentioned recently, like the channel tunnel. That's for the best anyway as those things need to be in the hands of folks that are skilled in running them, as opposed to government employees who couldn't run a hot bath.

[StrontiumDog]

Yet more doom and gloom.

[nigelandjan]

We might be ok soon ,the Dartford crossing is now up for sale ,, and the French are interested ,,,,,,allthough there is now a legal challenge as someone has pointed out it is an integral part of the M25,,,,,,,,can you imagine the queue back at the old Woolwich ferry if the new owners decided to close their new aquisittion ?? fuck me to the south it would go to Brighton and to the North we,d be qued up to WQatford gap !!!!!!!!!!!!

[Loombucket]

Britain going bankrupt.

This comes as no great surprise, seeing as the papers are full of Ministers having to pay money back to the Country because they have over-claimed expenses on their third and fourth homes. Now, it seems, our pensions aren't looking so good. Can that have anything to do with the fact that all Prime Ministers get a guaranteed pension for life? Lets elect another one!! *Rant....mumble*

[BillyBobThai]

As dear old Maggie said, socialism is great as long as you have someones elses money to take. I think they have finally broke the poor bastard.

[sabang]

^ It is the more 'Socialist' countries in Europe that have fared the best in the financial crisis. The UK, with it's underfunded government receipts because of it's relatively low taxation, especially on the rich, is in a bit of a hole.

[Jet Gorgon]

^ Wanna give us some stats on that, SB?

We still have...our greatest export.....know how.

I'm gonna start laughing now.

[lysander]

^ Wanna give us some stats on that, SB?

We still have...our greatest export.....know how.

I'm gonna start laughing now.

Come back in 2000 years and laugh.

[sabang]

^^ Just read the OP Jet, Germany, Austria, Belgium & the Skandi's are fine (except Iceland) France & Italy some problems, and Greece a perennial basket case.

[peterpan]

The UK will be ok, but not for a few years. We still have a good few quids worth of North Sea oil and our greatest export.....know how.

Such as the recipe for Branstons pickle or maybe the technique to manufacture Pork Pies
Your know how along with the best and brightest has been fleeing your soggy island for years, to the US, Aust and Asia.
The people involved in the Engineering for the company I used to work for are now living in sunny climes and doing design & consultancy work for Chinese companies.

[Butterfly]

another proof that Socialism works, and that the US and British model is a complete failure

[lom]

The people involved in the Engineering for the company I used to work for are now living in sunny climes and doing design & consultancy work for Chinese companies.

That explains why Chinese products has such a piss poor quality.

[Marmite the Dog]

our greatest export.....know how

Your know how along with the best and brightest has been fleeing your soggy island for years, to the US, Aust and Asia.

Maybe that's what he meant by 'export'?

[StrontiumDog]

I'm beginning to wonder if it isn't for the best, that the UK might go under. Attitudes need to change big time there. A whole succession of poor governments with nothing new to say, just different faces, but same bullshit. It is a most indolent country.

Inept, incompetent governance aside, the people of the UK need to wake up and seek change. Both in their attitudes and lifestyles, but also in who they choose to run the country and look after their interests. Gordon Brown and his cronies have been effectively whoring themselves and the country, to try to maintain a status quo. A tactic which has proven to be most ineffective. It's not how things work. Cameron will do the same.

It's a shame. The brain drain from the UK is a well known phenomena. A country of ideas and inventors, but historically poor at producing/selling/marketing the goods. The UK should be a far richer nation than it is.

[Seank]

Berlusconi probably told someone to write this article as Italy has being on the brink of bankruptcy even before the recesssion. It takes the heat of Italty.

[Muadib]

I'm beginning to wonder if it isn't for the best, that the UK might go under. Attitudes need to change big time there. A whole succession of poor governments with nothing new to say, just different faces, but same bullshit.

Sharia law, that's the way of the future...

[ItsRobsLife]

I'm beginning to wonder if it isn't for the best, that the UK might go under. Attitudes need to change big time there. A whole succession of poor governments with nothing new to say, just different faces, but same bullshit. It is a most indolent country.

Well said and it's a possibility that will certainly hang on a knife edge in the near future.

Inept, incompetent governance aside, the people of the UK need to wake up and seek change. Both in their attitudes and lifestyles, but also in who they choose to run the country and look after their interests. Gordon Brown and his cronies have been effectively whoring themselves and the country, to try to maintain a status quo. A tactic which has proven to be most ineffective. It's not how things work. Cameron will do the same.

The problem with a breakdown in the norms, is that it will be a Nationalist fervor that will shape the agenda, rather than a more socially interactive one, for the reason below.

It's a shame. The brain drain from the UK is a well known phenomena. A country of ideas and inventors, but historically poor at producing/selling/marketing the goods. The UK should be a far richer nation than it is.

Many people are voluntarily disenfranchised from the political system and prefer to move away from the problem or become secular in their own way.

Those that don't fall into those catagories are more likely to be angry and easily manipulated.

Good post.