Therre are senior Greeks who think Europe owes them a living. They seem to think they have a right to spend far too much on their unhappy and poor performing public sector and then to ask the Germans to pay the bills.Their efforts so far to cut spending and set out a course to get their deficit down have not won the confidence of the world’s money lenders. Their public sector workers object to pay cuts, when that offers them a much better way forward than wholesale redundancies. They have protested about doing what many in manufacturing industry around the wrold have had to do to survive over the last two years.
In the UK the government seems to think the world owes it a living. The administration thinks it can carry on borrowing, with the global money lenders happily paying the bills for the excess public spending. The main difference between Greece and the UK is that Greece belongs to Euroland and expects the EU to bail it out, whilst the UK is outside, and can put off adjustment a bit by devaluing its currency.
The numbers for Greece and the UK look very similar. Our public borrowing if properly stated is very high, higher than Greece’s. Both countries are attempting to borrow more than 12% of their GDPs this year and had hoped to carry on with high levels of borrowing in the following years. Both are now claiming to be ready to slash their deficits in future years, without clear and convincing plans on how. The UK’s devaluation has eased some of the pressures on the private sector, but has made the plight of the public sector worse as that sector imports a lot and exports very little.
Yesterday I asked the PM a simple question – Why, uniquely amongst advanced economies, has the UK got an inflation rate well above target and rising rapidly? It should not have been a difficult question for him to answer. After all, yesterday the Bank of England attempted to deal with its inflation critics by forecasting and promising a collapse in inflation again later on this year after the spike. Instead I was treated to an irrelevant rant based on his caricature of my policy recommendations. He failed to mention inflation or the state of the banks. No wonder people have so little confidence in this Parliament when we cannot have a sensible discussion of whether our inflation rate matters or not, and whether it will subside or if it could get another boost from further devaluation.