brian foley
02-03-2010, 09:16 PM
U.K. Teeters on the Brink of Its Own Greek Tragedy (http://www.nytimes.com/2010/03/03/business/global/03pound.html)
Could Britain be on the verge of a debt panic?
The fiscal crisis in Greece and a growing worry that the coming elections here could result in a hung Parliament, with no political party strong enough to push through unpopular deficit-cutting measures, have sparked fears that Britain will experience its own sovereign-debt meltdown. In such an event, foreign investors would sharply cut back on their purchases of British government bonds, leading to an interest-rate spike and a potential double dip-recession, if not worse.
“If you really want a fiscal problem, look at the U.K.,” said Mark Schofield, a fixed-income strategist at Citigroup. “In Europe the average deficit is about 6 percent of G.D.P. and in the U.K. it’s 12 percent. It is only just beginning.”
Since the Labour government’s intense fiscal intervention in 2008 and 2009, yields on British government debt have soared to among the highest in Europe. And on a broader scale, which includes the borrowing of households and companies, the overall level of debt in Britain is the second-largest in the world, after Japan’s, at 380 percent of the country’s gross domestic product, according to a recent report by the consulting company McKinsey.
In recent weeks, the focus of attention has been on debt scofflaws in Europe like Greece, Portugal and Spain, countries where borrowing costs have shot up in line with their burgeoning deficits as investors demanded higher rates to compensate them for the added risk of lending the governments money.
But the recent plunge in the value of the pound below $1.50 and the gradual move upward of Britain’s benchmark 10 year borrowing rate on government bonds, or gilts, to above 4 percent suggest that investors are now getting ready to reassess the country’s fiscal condition.
The New York Times where this article was pulled from still remains clueless to the Greek economic failure and the oncoming domino effect which will ripple through Europe, the US, and land squarely on China, who will not be exempt from feeling the economic fallout of that domino effect. Wooo Hooo for globalization and interdependence........
Could Britain be on the verge of a debt panic?
The fiscal crisis in Greece and a growing worry that the coming elections here could result in a hung Parliament, with no political party strong enough to push through unpopular deficit-cutting measures, have sparked fears that Britain will experience its own sovereign-debt meltdown. In such an event, foreign investors would sharply cut back on their purchases of British government bonds, leading to an interest-rate spike and a potential double dip-recession, if not worse.
“If you really want a fiscal problem, look at the U.K.,” said Mark Schofield, a fixed-income strategist at Citigroup. “In Europe the average deficit is about 6 percent of G.D.P. and in the U.K. it’s 12 percent. It is only just beginning.”
Since the Labour government’s intense fiscal intervention in 2008 and 2009, yields on British government debt have soared to among the highest in Europe. And on a broader scale, which includes the borrowing of households and companies, the overall level of debt in Britain is the second-largest in the world, after Japan’s, at 380 percent of the country’s gross domestic product, according to a recent report by the consulting company McKinsey.
In recent weeks, the focus of attention has been on debt scofflaws in Europe like Greece, Portugal and Spain, countries where borrowing costs have shot up in line with their burgeoning deficits as investors demanded higher rates to compensate them for the added risk of lending the governments money.
But the recent plunge in the value of the pound below $1.50 and the gradual move upward of Britain’s benchmark 10 year borrowing rate on government bonds, or gilts, to above 4 percent suggest that investors are now getting ready to reassess the country’s fiscal condition.
The New York Times where this article was pulled from still remains clueless to the Greek economic failure and the oncoming domino effect which will ripple through Europe, the US, and land squarely on China, who will not be exempt from feeling the economic fallout of that domino effect. Wooo Hooo for globalization and interdependence........