John Hemming's Web Log John's Reference Website
Friday, July 09, 2010
  Greece implements further cuts
Anyone who wishes to look at what would happen with Labour's financial strategy need look no further than Greece. They have had to implement greater and greater cuts in an attempt to bring their finances under control.

Looking at bond yields today:
Country Debt interest rate
Germany 10 year 2.64%
Greece 10 year 10.447%
Ireland 10 year 5.268%
UK 10 year 3.373%

This shows how greece is paying an interest rate of four times that of Germany on its debt. Having a higher deficit leads not only to a higher debt, but also a higher rate of interest on the debt.

Greece is a good comparison to Labour's policy as it was the Socialist party in Greece that pretended that little action was needed and then found itself in a really big mess.
 
Comments:
What worries me about all this debt and intrest is the scale of it all and the urgency to reduce the overall debt.

Slicing all the public services and making 100,000's of people out of work along with lord only knows what else, while it might be a quick fix for now, the long term I feel has not been fully thought out yet.

Take schools for instance, stopping all the funding to improve the schools network will only lead to a massive problem in five years time or so. Labour underfunded the education system for years, the crumbling schools in need of desperate repair will undoubtably be worse and as a consequence will need twice as much funding to put right somewhere down the line, an issue that cannot be brushed aside.

Addressing the debt issue head on is the most practical way forward by the Coalition so far.

Just put the breaks on all these cuts before we enevatably end up in a worse mess in five years time.
 
The urgency arises from the need to keep interest rates low.

The cuts in spending are needed so we don't have to borrow as much money.
 
What happens when the debt and intrest is reduced but the country is on its knees with the lack of an infrastructure sustainable to the needs of the people, clearing the debt is by all means a priority however history shows the problems that will arise, look at the 80's when the country was sold down the river, or the three day week in the mid 70's, come to think of it the 90's were boom and bust which I feel is where this overall problem started.

While it's all bells and whistles now, I fear this government will only last its 5 years, then labour will be back in and have to sort the whole mess out again. its just a horrible cycle I don't see being prevented.

As the cuts are necessary to avoid more borrowing, this is where I struggle with the issue, yes, no borrowing is the best result for all, but John, what happens when the country is so delapidated due to loss of services the Government has to borrow twice as much more again just to get the country back on our feet.

I had a letter from the Job centre through the door the other day saying "we are not helping you find work" as the programme I was on was withdrawn (Gov. cuts), now I have to wait till early next year for some other programme, So how will it help the rest who end up loosing their jobs because of the cuts but then the Jobcentre (balfour beatty) are not able to help either.
 
Without reducing the deficit, however, the country would face much more serious financial problems and have to implement greater cuts.
 
Greece is a good example because it had a socialist government? That's a rather daft comparison. Greece is not a good comparison at all - they have very specific structural problems not present in the UK economy. The UK debt does not need refinancing in the immediate future and there has not been a problem in selling UK debt at these low rates - even in advance of the election. It is grossly simplistic to equate Greece and the UK when they are self-evidently in different economic straits.

Still, if it keeps you and your colleagues happy...
 
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