The Great Debate UK

The UK should not waste its fiscal crisis

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hugodixon–  The author is a Reuters Breakingviews columnist. The opinions expressed are his own  –

 The UK should not waste its fiscal crisis. As Britain embarks on its election campaign, this is a perfect opportunity to engage in radical tax and spending reforms designed not just to restore the country’s fiscal balance but to boost its long-term productivity and competitiveness.

It is, of course, necessary to cut the deficit, which is currently running at an unsustainable 12 percent of GDP. It is also important that spending cuts rather than tax rises bear the brunt of the belt-tightening. Otherwise, the UK will find that companies and rich people are increasingly driven off-shore.

The two main political parties — the Labour government and
the opposition Conservatives — broadly buy into this. However,
neither party has spelt out what spending it would cut and where
it would raise taxes. Nor have they given any inkling of seeking
to take advantage of the crisis to push through deep-seated
reforms. They are unlikely to do so during the coming campaign,
fearing that too much detail will scare the voters.

from Breakingviews:

Goldman Sachs needs to admit it made mistakes

By Chris Hughes

Even the mighty Goldman Sachs makes mistakes. The Wall Street bank's decision to help Greece keep some of its debts hidden from public view in 2001 was one of them.

The transaction allowed the Greek government to present accounts which understated the state's liabilities by 1.6 percent of GDP.

GDP figures show we’re not out of the woods yet

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MarkBolsom-150x150.jpg-Mark Bolsom is the Head of the UK Trading Desk at Travelex, the world’s largest non-bank FX payments specialist. The opinions expressed are his own.-

As expected, Gross Domestic Product figures released today confirmed that the UK has finally emerged from recession. According to the Office for National Statistics, the UK economy grew by 0.1 percent during the last 3 months of 2009, bringing to an end 6 consecutive quarters of contraction.

from The Great Debate:

Icelandic, Greek sagas show sovereign risks

-- James Saft is a Reuters columnist. The opinions expressed are his own. --

Developments in cash-strapped Iceland and Greece nicely illustrate two themes for 2010: sovereign risk and financial balkanization.

Iceland is balking at crushing terms demanded as part of its making whole overseas depositors in its ruined banking system, while Greece is involved in a game of chicken with the euro zone authorities over how, when and with whose assistance it heals its fiscal difficulties.

from Breakingviews:

Recovery leaves too many big problems unsolved

ed hadas.jpgThe economic worst is past. But there are many issues left to worry about.

Start with the good news. GDP is now growing almost everywhere, while the unemployment rate is hardly rising anywhere. Businesses and consumers are less fearful. As much as half of the 20 percent decline in international trade has been erased.

Perhaps the best news is what has not happened. There have been no national defaults, countries dragged into political chaos, bitter divisions among the great powers or, with a few tiny exceptions, massive declines in consumption. The global political-economic-financial system is still in business.

Why is the UK still in recession when the U.S. isn’t?

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Recent U.S.  gross domestic product data show the world’s biggest economy emerged from recession in the third quarter, while in the UK data show that in the same period Britain’s economy contracted.

British economist and author John Kay theorizes that Britain is mired in its worst recession on record in part because government support has not been evenly distributed across sectors.

Re-entry dilemma for G20 ministers

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copeland1- Laurence Copeland is a professor of finance at Cardiff University Business School and a co-author of “Verdict on the Crash” published by the Institute of Economic Affairs. The opinions expressed are his own. -

As the G20 ministers gather for their meeting this week, there should be no doubt about the item at the top of the agenda: the re-entry problem. At what point should the expansionary monetary and fiscal policy of the past year be reversed? And, if the answer is “not yet”, how soon does the re-entry plan need to be announced?

Britain’s economy should learn to speak a little Chinese

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ross2- John Ross is visiting professor at Shanghai’s Jiao Tong University where he writes a blog on globalisation. The views expressed are his own. -

The success of China’s economic stimulus package has attracted increasing attention in Britain and internationally for two reasons. The first is simply its importance for the world economy. Second whether there are general lessons to be learned.

from Commentaries:

The case for GDP bonds

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Around the world, governments are struggling to drum up buyers for the mountain of bonds they need to sell. And that's especially true for big deficit, low savings countries like Britain and the United States.

The returns they are offering on conventional government bonds are low and there's the risk of inflation eating away at their value. Perhaps it is time for a different approach.

Predicting the economic effects of swine flu

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dm1- Marie Diron is senior economist at Oxford Economics. The opinions expressed are her own -

A swine flu pandemic would affect the economy via various channels involving supply and demand.

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