AS the UK’s debt tumbles into the dark and gloomy red there is a chance to look around us, at fellow European countries and realise that we are doing comparatively better than they are. If we take Greece, where their (according to the Daily Mail) debt crisis could wreck the eurozone in 5 years time as well as some EU leaders declaring it the worst crisis in Europe since WWII. However, we cannot just stand back and watch Greece fall to their knees due to it having a huge and detrimental impact on us.
Britain’s recovery from the banking collapse and recession of 2007-8 is being heavily slowed down and made far trickier due to each and every successive event shaking markets across the world. The global financial system is already very fragile yet it is being put to the test after the ‘Euroland’ has endured a roller-coaster ride bringing Greece, Portugal and Ireland to the brink of collapse. Other unstable governments such as Italy and Spain are already feeling the aftermath of the Greece fiasco. City analysts say that Spanish property markets have slumped by far more than it admits (down by 50% or more, rather than the official 14%). Once this is confirmed there will be a far bigger crisis due to investors “fleeing” putting further strain on the Euro which is according to the Week, suspected to collapse no later than 2013.
Fortunately, Britain is not part of Europe’s single currency meaning that we are marginally detached. Although, like it or not we are part of European Union and if there is to be an eruption we cannot escape the effects. Britain is under further pressure to contribute to the second Greek bailout having already sent around £1.5billion due to the International Monetary Fund. This second bailout cannot be ignored by the UK as if need be the IMF will be forced to step in and the UK will have to dig into its pockets.
Although £1.5bn is a huge sum of money it is not as detrimental as having to bailout Ireland. The UK have already loaned a whopping £7billion to Ireland and the Irish look unlikely to be able to pay it back resulting in a “budget black hole in the Treasury”. If Ireland cannot repay their debts then they UK may be forced to step in again for a second time which would be ruinously expensive.
Greece has to pay $485billion (340 billion Euros) of debt which amounts to an astonishing 30,000 Euros per person. MP’s in Greece will be now asked to approve 28 billion Euros of cuts, tax rises, fiscal reforms and privatisation plans. The vote took place against a backdrop of great tension in Greece, which is in the grip of strikes and sporadic riots. Vast numbers of demonstrators surrounded parliament, chanting “Thieves! Thieves!”
Germany will end up having to give off huge loans and guarantees, far bigger than any other country. “We pay – still we are abused!” This is mainly due to the fact that Germany has done so well out of the Euro and if they want the Euro to survive for much longer “they are going to have to foot the bill”. Although it may still seem unfair the bailouts terms will still inflict pain on the Greeks while saving German banks.
“To argue that deeper political integration is the solution to this mess is like recommending that a man with alcohol poisoning should retreat himself with a more powerful brand of vodka.” The Euro-elite have suggest that the way out of the crisis is an even closer European Union which would be catastrophic according to Gideon Rachman in the Financial Times. The political elites have in fact railroaded their countries into an unstable currency union which has left the two segments (the rich north and the poor south) feeling betrayed and resentful towards each other.
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