The ongoing Greek crisis may feel like a eurozone problem, but UK institutions are already suffering from the fallout: the FTSE 100 has been wobbling this morning, along with all the other major markets, and Moody’s warned that UK banks could see their credit rating affected if governments start defaulting on debts. But on General Election day, the European Union has been very keen to point out to our prospective leaders that we have a bigger problem to worry about: our budget deficit this year could be even bigger than Greece’s…
The European Commission reckons Britain will rack up a deficit of 12% this year. If it's right – and it’s more than the Treasury is currently forecasting – this will be the highest figure of all 27 EU member nations, surpassing Ireland and even basket case Greece. Not unreasonably, it argues this means the election winner – whoever that may be – must make the public finances its number one priority when it gets into Downing Street. The new government must ‘agree on a convincing, ambitious programme of fiscal consolidation', said EU commissioner Olli Rehn. It also scoffed at the Treasury’s growth forecasts for 2011: Alistair Darling has predicted 3-3.5%, but the EU reckons it will be more like 2.1%.
Not surprisingly, opposition politicians have pounced on this with glee (despite Alistair Darling’s best efforts to stress the bit about the UK recovering faster than most EU economies). And there’s an obvious subtext here: if we’re not careful, we could find ourselves in a financial hole similar to that currently occupied by Greece – living way beyond our means, forced to make painful and unpopular spending cuts to pay off our burgeoning debts.
Of course, in practice our situation is rather different from Greece, not least because we’re not encumbered by membership of the euro (which means we can devalue the pound, boosting our exporters). And our debt pile, while massive, is not quite as big as theirs. So it’s not terribly responsible for the likes of the Daily Mail to juxtapose images of the appalling Athens riots next to exhortations to vote Tory, the suggestion being that a hung parliament might result in the UK suffering the same fate.
On the other hand, all of this is a reminder of just how much is at stake in today’s election. The public finances are unquestionably in a mess and the next government faces an enormous challenge to navigate us out of it. So use your vote wisely.
In today's bulletin:
EU warns of UK Greek tragedy as Brits go to the polls
Morrisons hammered despite 6% sales growth
Dyson quits M&S to take (very) hot seat at Punch
John Vincent: Empty companies
Small business owners among the great ignored?