The Great Debate UK
Throughout history it has always been difficult to take something away from someone once you have given it to them. Europe is finding that it is extremely difficult to reign in public finances once they start to go out of control. Democracies don’t like to vote for austerity, which is why Sarkozy lost the Presidency in France, why a radical left party came second in the Greek elections and why the Conservatives got a drubbing at last week’s local elections in the UK.
This tells us something about democracy in the western world. Governments have to manage the public finances directly – they have to sell the debt, do the sums and present budgets. However, the people who vote them into (and out of) power are the public, who rightly in most cases, believe they have worked hard, paid taxes and deserve the services and retirement promises made to them.
So here we have the problem: some governments in the West have unsustainable debt loads and deficit levels and yet they don’t have the popular mandate to try and bring that under control. That isn’t the story all over the west. The Germans and the Dutch agree that the government books should be balanced. But if you asked the rest of Europe if they wanted to reduce public debt levels to make country finances more sustainable at the expense of public services and jobs, the recent election results suggest that you would get a resounding no.
So there isn’t one unified way of thinking about austerity in the West. Some people see it as a virtue, others as a type of hell. So what to do? Europe’s one-type fits all model that is largely designed by Germany could lead to social disorder and radical political parties grabbing the reins of power in Greece. However, the more people fight against austerity the more unlikely it is that their governments can attract enough investors to buy their debt to fund their public spending needs.
from The Great Debate:
It was the Welsh sage Alan Watkins who remarked that a budget that looked good the day it was delivered to the British Parliament was sure to look terrible a week later, and vice versa. The avalanche of new information dumped by the Treasury is simply too much to grasp at a single sitting, and governments tend to bury bad news in a welter of statistics. And so it proved with finance minister George Osborne’s budget served up last week.
The immediate headlines stressed that rich Brits would pay less income tax – down from 50 percent to 45 percent – but it only took a day before even traditional Conservative cheerleaders like the Daily Mail were condemning Osborne for funding tax breaks for bankers and billionaires by stealing from those living in retirement. The paper’s cover screamed: “Osborne picks the pockets of pensioners.”
from James Saft:
James Saft is a Reuters columnist. The opinions expressed are his own.
Four years, several failed banks and at least one global recession later, Britain has finally discovered what its young people need: 19-1 leverage.
Britain has announced a new housing initiative, the centerpiece of which is a plan to entice first-time buyers into buying newly-built properties with as little as 5 percent down.
from James Saft:
From Dublin to Paris to Budapest to inside those brown UPS trucks delivering holiday packages, it has been a tough few weeks for savers and retirees.
Moves by the Irish, French and Hungarian governments, and by the famous delivery company, showed that in the post-crisis world retirees, present and future, will be paying much of the price and taking on more of the risk.
from Global News Journal:
Every time I write a story on European countries cutting public spending, I feel a frisson of panic. I can't help but fear my health, lifestyle and liberty could be a casualty of the "age of austerity".
On assignment covering the Sri Lankan civil war for Reuters four years ago, I broke my neck in a minibus smash. It left me quadriplegic, almost entirely paralysed from the shoulders down and totally dependent on 24 hour care. I was 25.
In this current state of ‘austerity’, with a proliferating tax avoidance industry whose reason for existence it is to creatively exploit the ever-complicating fiscal spaghetti of taxing statutes – the new loopholes for avoidance which inevitably arise upon construction of new legislation, Benjamin Franklin would of course be wrong in his conclusion on certainty, that: “In this world, nothing is certain but death and taxes”.
It is fairly commonplace at the moment for U.S. and UK financial analysts -- what continental Europeans call the Anglo-Saxons -- to predict the collapse of the euro zone, a project they were mostly sceptical about in the first place. MacroScope touched on this on two occasions in March.
The latest foray into this area comes from Alan Brown, global chief investment officer at the large UK fund firm Schroders. But he does it with twist, blaming what he sees as the eventual collapse of the euro zone not on the structure itself nor on the profligacy of peripheral economies, but on Germany's response to the crisis.
-David Kuo is director at the Motley Fool. The opinions expressed are his own.-
If you thought 2009 was as bad as things will get, then think again: 2010 could be worse. It is likely to be a year of enforced austerity with both the government and households making obligatory cuts to their budgets.
High on the government’s agenda will be reducing the Budget deficit, if the UK is to avoid the embarrassment of having its sovereign debt rating cut by rating agencies. This will have a knock-on effect on households, which could see their disposable incomes slashed by hikes in both direct and indirect taxes.