

The economy

Autumn leaves falling

The growing troubles in the euro zone mean Britain is set for another recession

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An Drew

Maybe it is time to admit that trying to balance the budget in a time of recession is a foolish idea.

Maybe it is time to apologize to Keynes and all the people who went through the Great Depression for, so plainly, committing all the same mistakes again: austerity, fiscal prudence, balanced-budget--all nice but not in a time of recession.


Banks lending to banks, bailed out by governments lent to by banks. Exports led by loans to purchasing nations, instead of by trade. This all sounds like some sort of shadow play.

If you count up the debt being serviced by loans, what exactly is the debt ratio? Where is all the stunning growth to pay this off going to come from?

Banks made a lot of money off a ponzi scheme.

Top Hat 001

Do you think George Osborne could do what Gordon Brown did and say that he is not responsible for Britain woes? I think he could. Whereas Brown directly encouraged the housing bubble quite a bit, thus leaving Britain exposed, Osborne encouraged neither Greek profligacy, nor Irish profligacy, nor Portuguese profligacy, nor Italian profligacy.

If he does though, Labour will hammer him hard so he will have to make his point much better than Brown did. Mind you, if there any man in the Tory Party who can play politics and win, it is Osborne.


For goodness' sake! The Tories were warned where this electoral-winning game of exchequer-flagellation would lead. They, more than any Euro-crisis have done this to Britain. Recessions lead to Depressions as sure as the fruits of bad government policy are blamed on 'the markets'... Such a shame... What a waste...


Just like in the US, the banking sector has taken control over the direction of the economy. The FED is entirely focused on providing liquidity and free loans to banks, altering accounting rules, bending inside trading rules (see recent WSJ article on FED empolyees providing inside information to select few on Wall Street). Furthermore, with the help of special interest groups like AIPAC which receive great majority of their funding, Congress has been providing the legal cover for this massive transfer of capital from ordinary Americans who save and pay taxes to Wall Street in the form of low interest rates, free loans and assumption by government controlled entities (i.e. tax payers) the bad debts these banks have.
The end result: zero confidence left in ordinary people, transfer of productive assets abroad and transfer of capital in the hands of Wall Street banks which leverage and buy financial assets with a guarantee from the FED and the Treasury to buy them back if the markets collapse.
We are witnessing the collapse of the US and British economies slowly buy surely orchestrated by special interest groups for the few.


what coolaid are you drinking, buddy...UK is in deep shit, if borrowing 8% of gdp and overshooting is a sign of superpowerdom...then every damn country is a superpower.
only thing going for UK was the city of london, that also looks like slipping away due to the new regulations and transaction tax, cap on bonus etc.
"bond markets are likely to be forgiving"...is TE hoping and praying that this is the case, bond investors will want compensation for the risk and with UK sovereign risk increasing, yields will have to go up.
the whole euro zone is in a funk, Germany and ECB need to act soon before everything collapses right in front of their eyes. start with purchases of soveriegn bonds, take up the slack of private banks who have long since left the market. otherwise yields will be like what happened to italian issue the other day and german one a week ago.
market needs demand for paper and that needs to come from ecb, even if it means printing more money, depreciation of euro, inflation etc. you need growth. period. do everything possible to get growth and then worry about leverage etc.

Germanambassador in reply to VSMumbai

I am just reading and watching all medias in the UK and I only can hear and see that Britain has been the most prosperous and most successful country over the last 10 years in the whole world.
In all medias they tell me that Britain is the most powerful economic super-power in Europe and therefore Britain is going back to restructure its former Empire bigger and better as ever before.
Even the USA are watching enviously over to Big Britain which never had such a perfect and high standard of life and it will come better each day as we can see in the charts.
The British Pound is the actually the strongest currency in the world and never before the British citizens had such a wonderful life and so much money as they have actually.
Britain therefore is indeed the leading nation of the Western hemisphere and therefore they have ordered 35 brandnew air-craft-carriers with thousands of new jet-fighters for being present again on all seas of the world as they have been used over centuries.
Britain has been on the very best way a superior nation like the British could ever go and everybody will see that Britain will be as successful and powerful as they have been over the last 20 years.
The UK is on the right way and is setting a new outstanding example for real economic and political success in the world:)
Small countries like Germany are nothing but breathless if they are watching this kind the best success they have the British way.
Each British can only be grateful and proud of his great nation.
The British once more again gave an example that they make anything better as the rest of the underdevelopped countries around them.

Konker in reply to Germanambassador

The UK media might be saying those things but it is only because they are in denial. The most neoliberal countries (US, UK but look at Ireland, Iceland and Spain too) have caused problems for themselves and plunged the world into crisis. The other countries have spent billions trying to prevent themselves entering recessions but it has not worked and now many countries have large debt problems thanks to mitigating the effect of the 08 crash. Only the state-led capitalist places such as China, Germany, Scandinavia, Singapore, Korea, Taiwan etc have done OK. The world is now flipping from neoliberal outlooks that mean instability, bubbles, crashes and inequality on a scale last seen in the pre-civilized 1800s to a much stronger involvement of the state in directing economic development. The Economist will have to re-think some of its ancient and niaive perspectives on how economies can best work and see what is a good role for the state and where the line should be drawn.

Germanambassador in reply to Konker

Actually we see an extremely successful and highly prosperous development in the UK as well as in THe USA.
People in both countries never had a bette standard of life as they have now.
All indicators are pointing up to an extreme powerful economic development and give proof of the British and American superiority they ever had.
Britain is unbeatable and there is no country in the world which ever could compete with the British.
The British pound is the most important currency in the world and the keep their superior position over the rest of he world.
Britain will stay the economic and military super-power for the next centuries as it ever has been.
Britain just sets an example to the rest of the world and even the Americans only can learn from Britain while the underdevelopped part of Europe for ever will stay on the level of 3rd world countries.
Britain is actually stronger as it ever has been with its Empire.


Hi, matryoshka, matryoshka
Autumn leaves falling. Out of Autumn wind come spring flowers. Mr. Cameron and Mr. Osborne  (who is smart) . Mr. Osborne keep it simple and striate (and if possible honest)


Britain still is an economic and military giant and Britain is still one of the biggest super-powers in the world.
Having still their huge Commonwealth behind them, Britain has made huge progress and an extremely dynamic development over the last 10 years.
Actually there is no country in the world which is so powerful and prosperous like Britain and the British voters actually get the best they ever could get from a government.
Everywhere in Britain you see nothing but an extremely dynamic economy and the rest of the world is surprised about the rising power of the British Pound.
Actually the British Pound is one of the strongest currencies in the world.
I do not see any problem for the UK.
The UK will be the most powerful super-power within the next years with an extremely good economic development and therefore Britain will be the leading super-power of Western hemisphere)
The good old days of the Empire seem to come back for Britain:)


This bad economy is spreading worse than a new disease. I'm tired of seeing countries believe they're going to strive through and breakout in this bad, worldwide economy, and just fall right back in the pits of shrewdness. Companies are nervous to do business in Europe, people are becoming stressed about their occupations and money, everything is slowly collapsing. What really needs to be done here is for most countries to come together in this crisis and find an alternate route back to success.


The failure of the euro is going to hurt every country in the worl. The euro zone is one of the most profitable organizations in the world. Everyone, includeing the United States, is going to suffer from the collaspe. World trading is a huge part of many countries economy and will be greatly affected.


This is all a bit melodramatic.
You poll of forecasters still expects 1.1% growth in the UK next year (the highest of any major EU economy). And the exceptionally low long-term interest rates are a major stimulus, not to mention the enormous deficit.
I still think Osborne should freeze "benefits" and use the savings to make extra investments in infrastructure, R&D and a serious attack on long term unemployment, preferable through Opportunity Credit Vouchers. But by comparison with almost every other big Western economy the UK is doing remarkably well, esp. considering the complete mess they were left by the Brown government.


With Britain under stress from debt from other countries. They are barely getting by. They seem to have trouble cutting anything more from their budget to generate more revenue. A third party country is going to have to step up to help the health of the EU economy. This is clearly Germany. If Germany can help Britain help Greece and Italy than the EU will be much better off.


Quantitative easing and low base rate have failed to stimulate economic growth. Bank lending to private non-financial companies has fallen by more than 12 per cent since QE1 began in March 2009.

Interest rates for business loans are still high relative to the base rate.

As confidence is low and uncertainty is high, even the businesses that can invest are holding back.

The biggest economic policy failure in the UK during the boom years was the explosion of borrowing by banks, households, businesses and governments.

Low (or no) economic growth in the coming years is an inevitable consequence of high debt.

The government can do the following:

1. Cut taxes on income and savings in order to encourage more investment.

2. Introduce a tax policy that deters land and property speculation while rewarding enterprise – the opposite to what it does now.



This cataclysmic domino event is effecting everyone. The euro is crumbling at Europe's and the world's fingertips and no one can do anything to stop this madness. The euro falls and and Britain goes into a recession. This needs to be fixed. If the British government borrows money to try and balance it, then they will be in even more debt than they already are which is not good for them. This whole ordeal is a mess and it seems there is nothing human minds can do to stop the decline of their own invention.

Martialart Panda

with the spreading crisis around Europe, UK ,though, its uniqueness(remaining its own currency), can't be avoidable to face the embarrassing situation, thanks to the closeness and geographical position to the Continent. From my point, the UK economy especially the staple commodities, like foodstuffs is excessively dependent on the importing, that's the weakness to be easily trapped by the surrounding crisis and can't provide junior employment jobs for its domestic people. so it's very sensitive and fragile to be impacted.


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