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Sunday, June 19, 2011

Should Britain be worried by the Greek financial crisis?

Those who argued that Britain should not enter the Eurozone are no doubt feeling vindicated this morning as the Greek financial crisis threatens to bring the currency crashing to the ground.

The fact that we are not in it owes something to politics but also to the economics of entry. Put simply the circumstances under which we might consider joining the Euro were never right.

However, that does not mean that the project was wrong-headed or even that we should not consider signing up at some stage in the future if both the British and the European economy meet stringent conditions and if they survive this present crisis.

What we should not do however, is consider that what is going on in Greece, Portugal, Ireland and Spain has nothing to do with us as this article in the Independent on Sunday makes plain:

The UK may not be in the euro, but be in no doubt that the continent is far and away this country's most important trading partner. As it is, the UK, behind France and Germany, provides the third-highest amount of bank and private lending to Greece. If the crisis spreads to the other economies that have struggled so badly in the financial crisis – Portugal, Ireland and Spain – then it will hurt the UK. Britain is particularly exposed to the Spanish and Irish property markets, which have already been brought to their knees. Any further collapse could expose British banks to some of the worst effects of the crisis.

Greece in particular, is learning the lesson of an over-reliance on the public sector and a failure to take account of the impact of debt on the economy. Their position provides a strong argument for the present Government's austerity measures and why deficit-deniers like Ed Balls are wrong.

However, the impact of their crisis on Britain could be very severe indeed, not least because of the international obligations entered into by the last government and the effect it may have on our trade.

If the Euro-project falls apart then our current financial problems will be compounded. That is an outcome that even Euro-sceptics should not wish for.
"Should Britain be worried by the Greek financial crisis?"

Could ask if Wales should be worried.

In Wales there is an over reliance on the public sector for job creation.

Wales is a place where an Assembly Government has delivered an economy that squirrels along at the bottom of the UK economic league tables.

Wales is a place where a Cabinet appointed by a First Minister has proven incapable of delivering unto Wales a decent international airport.

A Welsh government that has proved itself incapable of harnessing one of its top assets to create jobs and businesses at home.

The Welsh 'leadership' has diminished Wales to the point Wales is turning into a has-been region of the UK.

Chris Wood (from Cardiff, Wales)
Could you find a different phrase to use than "deficit-denier". Along with the equally repugnant "climate change-deniers", the rhetorical conflation of those that have a different point of view with those who denied the nazi holocaust is the cheapest of political cheap shots.

In any event, Ed Balls doesn't deny the deficit or argue against reducing it. He simply has a different view to you on how quickly it should be reduced and, who knows, he may even be right. You know that, so why this smear?
"Greece in particular, is learning the lesson of an over-reliance on the public sector and a failure to take account of the impact of debt on the economy."

Same thing could be said about the USA - huge expansion of the public sector on President Obama's watch, Congress and the White House not helping the American business sector, a HUGE change in patent law (President Obama wants to copy the European patent system) that flies in the face of how small innovators innovate (e.g., switching from 'first to invent' to 'first to file') and destroying the 12 month grace period that has proved to be so useful for small businesses in the game of innovating, a HUGE job creation killer.

Chris Wood PhD (expert in protecting innovation in the USA)
Of course Greece should never have been allowed into the Eurozone. Their economy was no where near aligned with that of Germany so would always be under pressure. Pressure which was compounded by the "financial crisis".
Greece wil have to default and leave the Euro with Portugal and maybe Ireland close behind. Italy has a chance to avoid such action if it moves quickly.
None of this is bad in the long term except for the reputation of ECB and a few Euro Politicos.The Euro will survive and prosper provided it is more careful about who it lets into the club.
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