Despite the IMF and the Eurozone finally agreeing the terms of a €110bn bailout for Greece, the situation there remains a complete mess: its financial system is teetering on the brink of collapse, while large swathes of its workforce are going on strike to protest against the fearsome austerity measures being imposed by the Government (as a quid pro quo for the bailout money). For any European country struggling with soaring debt and an unmanageable deficit (ring any bells?), it’s an alarming glimpse of what the future may hold. Still, the good news is that the latest data from the UK manufacturing sector – which grew at its fastest rate for 15 years in April – suggests that we’re not quite such a basket case…
Manufacturing activity jumped from 57.3 to 58 points last month, according to the influential index compiled by the Chartered Institute of Purchasing and Supply/Markit. That’s the fastest growth rate since September 1994 (when we were also coming out of a dirty great recession), and it’s allowing manufacturers to hire at their fastest rate since February 2007. OK, so we’re starting from a low-ish base – but demand was particularly strong from overseas, which suggests that the continued weakness of the pound is finally starting to help our exporters. Of course this couldn’t have happened if we were part of the Eurozone. So although the CIPS/ Markit index points to a recovery, or at least reduces the chances of a double-dip, which reflects well on the Government, it’s also a fillip for opponents of the euro (so the Tories, but not the Lib Dems).
Poor old Greece probably wishes it had stayed out too, now. For a start, it’s been unable to devalue its currency as its economy has gone down the pan. And perhaps more significantly, it’s discovered that its fellow member states aren’t very keen to put their money where their mouth is when it needs them most. This weekend – in conjunction with the IMF – the Eurozone countries finally agreed on a bailout package worth up to €110bn over the next few years, but there’s a degree of gritted teeth about it. And the austerity measures that Greece has been required to impose have already led to widespread protests, with public sector workers (who’ll bear much of the pain) starting a 48-hour national strike today. Nobel-prize winning economist Joseph Stiglitz suggested on Radio 4 today that this fiasco could spell the end of the euro, arguing that member states haven’t done enough to limit the fallout.
So the UK has at least one reason to be grateful. And the return of the manufacturing sector (which admittedly only accounts for about one-seventh of our economy these days) does suggest things are looking up. But with our (near-Hellenic) budget deficit sure to require similar austerity measures, those mass strikes in Greece could well be a taste of things to come for whoever wins the Election.
In today's bulletin:
Manufacturing boosts UK as Greece chaos continues
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