European Commission Sees Galloping Uk Debt Crisis

[Realistbear]

http://www.telegraph.co.uk/finance/finance...ebt-crisis.html

European Commission sees galloping UK debt crisis

Britain's public debt will explode to 180pc of GDP within a decade unless future governments take drastic measures to restore fiscal probity, according to a confidential study by the European Commission.

By Ambrose "Ambers" Evans-Pritchard

Published: 8:03PM BST 10 Sep 2009

The Treasury expects UK's debt to peak at around 80pc, less than half the EU prediction

The projection is more than twice the level forecast by the UK Treasury, which expects the debt to peak at around 80pc before gradually falling as growth revives and tax revenues come back to life.

What is shocking is that UK risks decoupling from the other major economies in Europe, vaulting past Germany, France and even Italy into a wholly different league. Ireland is in the worst shape, with debt projected to reach 200pc of GDP..../

Brussels warned Britain before the onset of the crisis that public spending was out of hand, repeatedly reminding Gordon Brown that the credit boom was masking the true scale of the problem. The UK ran deficits of 3pc of GDP at the top of the cycle, while Spain was running a surplus of 2pc. Britain was the only major country to face the EU's excessive deficit procedure in 2007, even before recession played havoc with state finances.

Irrational exuberance everywhere at the moment: sterling, FTSE, Estate Agents (experts)........

The Piper has not even begun to be paid for Brown's decade of imprudence. The stimulus was nothing more than a hypodermic shot of debt and the bubble is being re-inflated with the same air that fuelled it last time: debt, debt and more debt. If debt is the only thing that can keep Brown's economy going we are doomed to become the poor man of Europe within a few short months asd there is no way he can keep this ridiculous facade going.

No wonder the bank robbers are continuing to milk what they can before it all collapses again.

Edited September 11, 2009 by Realistbear

[interestrateripoff]

But debt is wealth.

We are trying a new paradigm that a more debt will solve a debt crisis. It's an interesting experiment.

[Realistbear]

But debt is wealth.

We are trying a new paradigm that a more debt will solve a debt crisis. It's an interesting experiment.

How do you guard against smallpox? Inject yourself with a smallpox vaccine.

So I suppose Brown is following that kind of example. If everyone becomes too big to fail debt will become an asset.

[Deckard]

Irrational exuberance everywhere at the moment: sterling, FTSE, Estate Agents (experts)........

I'm not sure that's the analogy you want to use RB

Alan G coined the expression in 96, but the market kept going for another 4 years after that...

[interestrateripoff]

How do you guard against smallpox? Inject yourself with a smallpox vaccine.

So I suppose Brown is following that kind of example. If everyone becomes too big to fail debt will become an asset.

We may have already reached the point where the majority have too much debt and therefore have become too big to fail.

[piece of paper]

How do you guard against smallpox? Inject yourself with a smallpox vaccine.

So I suppose Brown is following that kind of example. If everyone becomes too big to fail debt will become an asset.

A teeny bit under the skin - not shooting up with a horse syringe!

p-o-p

[babesagainstmachines]

What's the issue. The Government owns Northern Rock, it can get a 6*GDP mortgage. We could go for the cashback one for a bit of instant spending money

[Willy Weasel]

This will get very interesting very quickly when the BoE stops buying gilts. Remove that demand and we are staring down the barrel of multiple failed auctions.

[Austin Allegro]

I never thought I'd see the words 'fiscal probity' and 'European Commission' in the same sentence...

[Si1]

this really does remove most arguments against privatising all public services bar the NHS, libraries and a handful of other essentials.

fact is, without this, we're f00ked; with these privatisations, our children have a chance.

Edited September 11, 2009 by Si1

[Bloo Loo]

no problem, its a loan of 2 x income, IO. well safe.

[council dweller]

this really does remove most arguments against privatising all public services bar the NHS, libraries and a handful of other essentials.

fact is, without this, we're f00ked; with these privatisations, our children have a chance.

Isn't that the same as 'sell and rent back'?

Would you sell your driveway and then pay a toll to drive down it? Would your children be happy about this?

[yellerkat]

The Economist sees UK debt at 112.5%/GDP - precisely - in 2011.

Cutesy interactive global map.

[Nationalist]

no problem, its a loan of 2 x income, IO. well safe.

You're confusing GDP and government income. The former is one trillion and the latter £480bn. So it's more like 3.75 times income - with no repayment vehicle in sight.

[Si1]

Isn't that the same as 'sell and rent back'?

not quite - the private sector are normally much more efficient than the public sector

Would you sell your driveway and then pay a toll to drive down it?

if I was f00ked by debt, I'd sell the driveway, and then park somewhere else, cheaper, or sell my car too. A bit like people being reposessed and then living in rented accomodation - do you really think they go and rent a bigger or a smaller house afterwards? smaller, I bet.

[jonboy]

this really does remove most arguments against privatising all public services bar the NHS, libraries and a handful of other essentials.

fact is, without this, we're f00ked; with these privatisations, our children have a chance.

Now, I don't want to fight, you have too many legs for a start.

When we 'privatise' these previously public services we still manage to spend lots of public money on them, they cost us more cos taxes don't adjust and we pay directly, we generally get a worse service especially over time, and the killer blow, any 'profits' go to exec bonus and shareholders.

Now don't get bogged down in details but generally.... that's what I believe.

The important thing is we need to prioritise what we think the state MUST provide for us from the entire public spend. Please note, "entire public spend" is not 'entire spending on public sector organisations', which narrows your scope for appropriate disinvestment opportunities and is just wrong.

I'd like to cut back on/ scrutinise:

• "Defence": Tridant and current liberation efforts (cough)

• QE and artificially low interest rates

• 2012

• Rate of return from from publicly owned banks

• Devolved budgets for supporting local inward economic investment

• Inefficiency in all public sector - particularly the way they commission services and manage delegated budgets (that's massive!)

No time to really think about these ATM so I'm sorry if some are simplistic but the point is, we are often too narrow in our debate about "public spending".

Oh yeah, and the public should decide on prioritisation and rationalisation of public spending; we can't trust the politicians to be apolitical about it.

[Si1]

Now, I don't want to fight, you have too many legs for a start.

When we 'privatise' these previously public services we still manage to spend lots of public money on them, they cost us more cos taxes don't adjust and we pay directly, we generally get a worse service especially over time, and the killer blow, any 'profits' go to exec bonus and shareholders.

Now don't get bogged down in details but generally.... that's what I believe.

The important thing is we need to prioritise what we think the state MUST provide for us from the entire public spend. Please note, "entire public spend" is not 'entire spending on public sector organisations', which narrows your scope for appropriate disinvestment opportunities and is just wrong.

I'd like to cut back on/ scrutinise:

• "Defence": Tridant and current liberation efforts (cough)

• QE and artificially low interest rates

• 2012

• Rate of return from from publicly owned banks

• Devolved budgets for supporting local inward economic investment

• Inefficiency in all public sector - particularly the way they commission services and manage delegated budgets (that's massive!)

No time to really think about these ATM so I'm sorry if some are simplistic but the point is, we are often too narrow in our debate about "public spending".

Oh yeah, and the public should decide on prioritisation and rationalisation of public spending; we can't trust the politicians to be apolitical about it.

chop chop! no, to be fair, don't disagree hugely with you - except bear in mind that the huge public spending spent on privatised orgnaisations is largely a Labour phenomenon - when they would have preferred said organisations not to be private in the first place.

edit to add: depends on the size of the electoral mandate - if tories win by a landslide, then they can indeed wield the axe deeply

Edited September 11, 2009 by Si1

[interestrateripoff]

This will get very interesting very quickly when the BoE stops buying gilts. Remove that demand and we are staring down the barrel of multiple failed auctions.

Do you think they will?

[council dweller]

not quite - the private sector are normally much more efficient than the public sector

if I was f00ked by debt, I'd sell the driveway, and then park somewhere else, cheaper, or sell my car too. A bit like people being reposessed and then living in rented accomodation - do you really think they go and rent a bigger or a smaller house afterwards? smaller, I bet.

I thought privatisation had been discredited? Public or private, it makes no difference. Take water,BT and gas for example, are our bills higher or lower than than if they weren't privatised?

The only way out of this debt is default.

[interestrateripoff]

I thought privatisation had been discredited? Public or private, it makes no difference. Take water,BT and gas for example, are our bills higher or lower than than if they weren't privatised?

The only way out of this debt is default.

Railtrack was a huge success, as was BT which still might end up back in public ownership. Perhaps this is the plan for the govt to get back what it once privatised and then it can sell them off again?

[Si1]

I thought privatisation had been discredited? Public or private, it makes no difference. Take water,BT and gas for example, are our bills higher or lower than than if they weren't privatised?

does that calculation include (1) taxpayer subsidies (2) international commodity prices (3) govt legislation improving service standards, ie water quality and ecological impact ??

Edited September 11, 2009 by Si1

[huw]

Er...

The figures are based on the assumption that the emergency fiscal support of the last year is withdrawn in an orderly way by 2011, but that there is no further retrenchment thereafter. "It is a no-policy-change scenario, not a prediction of what will happen," said one official

There will be retrenchment no matter who wins the election. So the ballooning debt is not actually being predicted. This is the concerning bit:

Stephen Lewis, chief strategist at Monument Securities, said that once public debt goes much above 100pc of GDP it becomes hard to reverse. "The debt snowballs because interest costs alone push up the deficit, so you can race up to 180pc very fast."

Attempts to bring the debt down by a spending squeeze can prove counter-productive because lack of growth itself drives the deficit higher. "Once you get there your trapped," he said.

IMO the message is that the UK is in for a painful re-adjustment and may end up stabilising at a lower level of output with correspondingly lower consumption, NOT that the deficit will not be addressed.

[interestrateripoff]

IMO the message is that the UK is in for a painful re-adjustment and may end up stabilising at a lower level of output with correspondingly lower consumption, NOT that the deficit will not be addressed.

And the idiot in charge is pushing us into this debt trap as fast as he can.

[council dweller]

does that calculation include (1) taxpayer subsidies (2) international commodity prices (3) govt legislation improving service standards, ie water quality and ecological impact ??

No, the calculation includes private profit versus public ownership on the other side though.

Have the gas companies been making massive profits? Of course, their priority is the shareholder not the public.

Somebody say BT!? Rip off merchants!!

[Executive Sadman]

How long till Bliar takes over the EU? he'll set them straight on the awesomeness of debt.