What an election to lose.
Or, why winning is really a loss.
Britain is in for five years of austerity.
A mad day of selling around the world overnight has increased uncertainty everywhere.
The US market lost 997 points at one stage and finished sharply lower in its biggest daily loss for months.
The big fall was blamed on faulty market quotes for a major stock, Proctor and Gamble.
But Europe and Asia were weak for another day.
Britain has a deficit of 163 billion pounds, more than Greece as a share of GDP in 2010, and for the foreseeable future very little options in reducing it other than huge cuts in spending and higher taxes.
That’s a deficit of more than 11% last year and 12% this year, without any more spending.
If the UK is lucky it will see 1% economic growth this year and 2% next year.
Not enough to cut unemployment, but not as bad as Greece, which is expecting to shrink its economy by 3%-4% this year alone and 2.6% next year.
With the unrest in Greece competing for headlines in the past fortnight, it’s understandable that all three parties, Labour, Conservatives and Liberal Democrats avoided providing any clues, except generalities, on how to cut the deficit and the mounting national debt.
Stimulating economic growth isn’t an option, the rest of the world that the UK supplies, (Europe and the US and Africa) are a long way from the rapidly growing Asia which has boosted the likes of Australia, Japan, Canada, and parts of the US.
According to last minute media reports there’s a feeling the Conservatives will get up with a sufficient margin to be able to claim a win and then tackle the deficit.
But no matter the result, the tough stuff starts from today.
Greece has to be rescued, but the European Central Bank gave no assurances on whether it would step in to help other countries.
Moody’s warned that banks in several countries, including the UK, were vulnerable to weak economies and cuts in spending that were too deep, or not enough.
The UK Government controls two banks, so it could be swept up in any contagion from further problems in the eurozone.
If the UK doesn’t act in a way that reassures investors, the markets turn their beady eyes on the country’s huge debts and deficit.
Britain has to find ways of getting the growth it once had from financial services and it has to convince markets that the new government’s ideas are credible and can work.
Banks, the City, etc will still be vital, but no longer the drivers of the economy.
After all, they (plus compliant regulation and political cupidity) pushed the UK into its present position.
The greek parliament approved the austerity package overnight and hopefully the German Parliament will sign off on its share of the bailout as well, all 24 billion euros of it, a massive amount of money.
On Sunday voters in North Rhine Westphalia vote in a regional election in Germany, the results of which will impact on Germany’s standing in Europe.
Should they punish the conservative government of Mrs Merkel, then Europe could very well find itself divided on issues like supporting other countries who get into trouble, such as Portugal.
If David Cameron and the Conservatives win the UK poll, their anti-EU stance will make it that much tougher for Britain to have a credible voice in Europe on issues such as aid, money and finances.
The carping expected from a Cameron-led government will upset the conservative leaders of Germany and France, the two super powers of the EU.
If that happens, heaven help Britain if it needs a helping hand in the event of the markets deciding to attack sterling.
On Monday the Bank of England’s Monetary Policy Committee meets to look at interest rates, stimulus, deficits and debt, the usual stuff of these meetings.
But it will have greater importance with any change of government.
As well, if they win the Conservatives have said they will do away with the Financial Services Authority, the primary financial regulator, and hand the powers and resources back to the Bank of England.
That could damage confidence in the UK, especially if there’s continuing market instability.
The central bank will, like the new government, have to consider the country’s rotten financial state.
The European Commission says that the UK deficit in 2010 is set to hit 12% this year, more than any country in the European Union, including Ireland, whose deficit is set to reach 11.7%, and Greece, where the deficit is predicted to be 9.3% (down from 13.6%, if the austerity package works).
The EU average deficit is forecast to be 7.2% of GDP
The respected London economic think tank, the National Institute of Economic and Social Research, says the UK economy will grow more slowly this year and next because consumer spending will be weak.
It says growth will be 1% this year, down from the 1.1% rate forecast in January, with 2011 seeing a rise of 2% and 2.2% in 2012, both unchanged.
Institute economist Simon Kirby was reported as telling UK media that "the economy will crawl this year".
"We’re expecting growth to continue over the next couple of years, but his growth is weak."
He said the institute saw the need for deeper cuts and higher taxes to reduce the budget deficit and to start controlling borrowings.
It’s looking for cuts and higher taxes of 2% of UK GDP, or about 30 billion pounds ($US46 billion). Not Greece, but …
The European Commission pred
