Socio-economic thinktank NIESR has also slashed its UK 2012 growth forecast from 2% to just to 0.8%. The implications of these tiny increments are severe: the UK is facing its slowest economic recovery since the First World War.
However, as Sarah Connor said in Terminator, ‘There is no fate but what we make’ and the NIESR has a few tips on dodging financial ruin: ‘It remains our view that in the short term fiscal policy is too tight, and a modest loosening would improve prospects for output and employment with little or no negative effect on fiscal credibility,’ the report suggests.
The Chancellor seems hell-bent on sticking to his austerity measures. And over in Cannes, the G20 Summit on the future of Europe is still fighting to make progress. In the wake of Greek PM Papandreou’s shock referendum, investors like China and Brazil are balking at buying up EU debt through the Special Purpose Vehicle (SPV- renamed this week; ‘SPIV’, the last acronym, had criminal overtones). These nations are understandably skittish: events of recent days seem to show that Europe can’t find its way out of a brown paper bag, let alone a financial crisis.
Today, Greece is in further turmoil. Finance minister Evangelos Venizelos has shot down his PM’s plan to put the bail-out plans to a referendum. ‘This acquis by the Greek people cannot depend on a referendum,’ he said in a statement. ‘What is important is for the sixth tranche to be disbursed, without any distractions or delay, according to the decisions of Eurogroup of October 26, which came as a result of 10 hours of hard negotiations.’
German chancellor Angela Merkel has made her position very clear: ‘Does Greece want to stay in the eurozone? Yes or no?’ the iron lady of Deutschland demanded last night. At least the FTSE recovered slightly after the markets went into freefall earlier this week. It closed last night up 62.5 points.
And now for a little more good news. The NIESR says that although it previously forecast a UK budget deficit of 6.7% of gross domestic product in 2012-13, (the Office for Budget Responsibility went for 4.5%), it now reckons that the Government will meet its rolling five-year target with a budget surplus in 2016-17. Happy days.