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Sunday, June 13, 2010
Cartoon: Cuts and Britain's credit rating
Howard's cartoon from Friday's Liberal Democrat News.
We've been all through all that. We have also noticed that the day after Spain did what it was told and announced €15bn of cuts, Spain's credit rating rating was reduced. The day after the UK announced £6bn cuts with a promise of more to come in the autumn, the agencies went out of their way to congratulate the country for what it was doing.
But the UK is an 'Anglo-Saxon' country and enjoys immunity from the ratings agencies attacks, not least because it is part of the wolf pack* that is the world's financial system. Its deficit is slightly higher than Spain's, and its debt is much higher, but who cares about that?
*The words are from the Swedish Finance Minister. Sweden is not in the eurozone but recognises the need to defend the euro. And like Poland, which also does not use the euro, it's willing to put its money where its mouth is to help its neighbours. Unlike a certain offshore island I could name.
From what I hear from friends who have interests in Spain (or had, having got out), and from my own one and only trip, Spain's route to penury has been via property speculation (including building a lot more than was needed).
Makes one wonder how you climb out of this pit. We are told to use our brains - but the Indians have good brains, there are a lot more of them, and they charge less.
Spain's banking problem (apart from a structural problem with a lot of small locally-based savings banks) was indeed caused by a property boom that left the banks badly exposed.
Much will be used eventually as people move out of city centres to suburbs. It should have been foreseen but it wasn't.
There is another problem. Spain relies largely on tourism for income and the crisis is slowing that down. But then, and connected with that, there is Germany, where Angela Merkel has handled things catastrophically for everyone, including her own country. Germany's huge surplus is not particularly because the Germans are hard-working north Europeans compared wit feckless Mediterranean types. It is because Germany exported lots of things to poorer southern countries that couldn't devalue their currencies to become competitive. The Germans reuse to recognise that and won't restart their own economy so that we can get the whole thing moving again.
Spain has problems, though penury is a wild exaggeration for a country that has a lower level of debt and deficit than the UK. Nobody denies the problems. But having your legs cut from under you when you try to stand up again -- and having that done by the very people who laid you low in the first place -- is not very helpful.
4 comments:
We've been all through all that. We have also noticed that the day after Spain did what it was told and announced €15bn of cuts, Spain's credit rating rating was reduced. The day after the UK announced £6bn cuts with a promise of more to come in the autumn, the agencies went out of their way to congratulate the country for what it was doing.
But the UK is an 'Anglo-Saxon' country and enjoys immunity from the ratings agencies attacks, not least because it is part of the wolf pack* that is the world's financial system. Its deficit is slightly higher than Spain's, and its debt is much higher, but who cares about that?
*The words are from the Swedish Finance Minister. Sweden is not in the eurozone but recognises the need to defend the euro. And like Poland, which also does not use the euro, it's willing to put its money where its mouth is to help its neighbours. Unlike a certain offshore island I could name.
Spain suffers from being too dependent on spending from other EU nations, especially UK. So as the rest of the EU cuts, Spain's income falls.
It seems unfair, as Spain tightened its banking legislation in advance and thus avoided the toxic bonds debacle.
From what I hear from friends who have interests in Spain (or had, having got out), and from my own one and only trip, Spain's route to penury has been via property speculation (including building a lot more than was needed).
Makes one wonder how you climb out of this pit. We are told to use our brains - but the Indians have good brains, there are a lot more of them, and they charge less.
Spain's banking problem (apart from a structural problem with a lot of small locally-based savings banks) was indeed caused by a property boom that left the banks badly exposed.
Much will be used eventually as people move out of city centres to suburbs. It should have been foreseen but it wasn't.
There is another problem. Spain relies largely on tourism for income and the crisis is slowing that down. But then, and connected with that, there is Germany, where Angela Merkel has handled things catastrophically for everyone, including her own country. Germany's huge surplus is not particularly because the Germans are hard-working north Europeans compared wit feckless Mediterranean types. It is because Germany exported lots of things to poorer southern countries that couldn't devalue their currencies to become competitive. The Germans reuse to recognise that and won't restart their own economy so that we can get the whole thing moving again.
Spain has problems, though penury is a wild exaggeration for a country that has a lower level of debt and deficit than the UK. Nobody denies the problems. But having your legs cut from under you when you try to stand up again -- and having that done by the very people who laid you low in the first place -- is not very helpful.
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