David Prosser: Greek lessons for Britain's next Chancellor of the Exchequer


Outlook: Let's be clear. Britain is not Greece. We may currently be running record budget deficits, but our total debt as a proportion of GDP is less than half that of the Greeks.

We retain our AAA credit rating. Our economy has exited recession. The average term before our debt has to be repaid is much longer. For all these reasons and more, our situation is not comparable to the ghastly crisis that faces the people of Greece.

So, were the likes of Vince Cable simply scaremongering when they raised the possibility yesterday of a similar crisis coming to the UK? Not entirely. Spain is not Greece either, yet it saw its credit rating downgraded yesterday – Standard & Poor's no longer thinks its economy will hit the targets that have been set for it.

One reason the Greeks find themselves in the position they do is because they have borrowed so much and now can't afford to pay it back. Another is that Greece has simply not been able to convince the markets – specifically, the investors in its bonds to whom it owes money, or those who might want to buy such debt – that even now it has a credible plan for getting the public finances under control.

First, the Greek government fibbed about how much money it actually owed. Then it gave commitments it could not possibly hope to keep and, finally, it agreed a deal with the International Monetary Fund and the European Union without any of the parties involved offering clear detail on what was planned.

Does this failure to offer a credible roadmap for deficit reduction sound at all familiar? The Institute for Fiscal Studies says the lack of credibility of all three political parties hoping to form the next government of this country can be costed quite precisely, thanks to their manifestos and public pronouncements on economic policy: in each case, it runs into tens of billions of pounds.

It is entirely rational to argue that Britain is far removed from Greece's parlous position. The trouble is that markets are often not rational. Sometimes, what investors on those markets believe at a given moment is more important than the facts, especially in the middle of a panic. And when you leave it to investors to fill in the blanks in your explanations, you run the risk that they'll get it wrong.

The lesson of Greece's crisis for Britain is not so much that debt can become unsustainable, though of course it can. More relevant to us is the example of how a problem not dealt with promptly and plainly can very quickly turn into a crisis that you no longer have any hope of controlling.

PROMOTED VIDEO
Life and Style
President Obama, one of the more enthusiastic users of the fist bump
science
Arts and Entertainment
Peter Griffin holds forth in The Simpsons Family Guy crossover episode
tv
Life and Style
Upright, everything’s all right (to a point): remaining on one’s feet has its health benefits – though in moderation
HealthIf sitting is bad for your health, what happens when you stay on your feet for a whole month?
News
Kristen Stewart and Rupert Sanders were pictured embracing in 2012
people
Sport
Mario Balotelli posed for this selfie during AC Milan's 5-1 defeat to Manchester City
sport
Sport
Laura Trott with her gold
Commonwealth Games
Arts and Entertainment
Gal Gadot as Wonder Woman
arts + ents
News
ebookA unique anthology of reporting and analysis of a crucial period of history
News
Bryan had a bracelet given to him by his late father stolen during the raid
people
Sport
France striker Loic Remy
sportThe QPR striker flew to Boston earlier in the week to complete deal
Extras
indybestSpice up your knife with our selection of delicious toppings
Sport
sport
News
Orville and Keith Harris. He covered up his condition by getting people to read out scripts to him
People
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Training/Learning and Development Coordinator -London

£28000 - £32000 per annum: Ashdown Group: Training/Learning and Development Co...

Training Programme Manager (Learning and Development)-London

£28000 - £32000 per annum + benefits: Ashdown Group: Training Programme Manage...

.NET Software Developer (.NET, C#, ASP.NET, front-end)

£30000 - £45000 per annum: Harrington Starr: A Global Financial Service Organi...

C# Web developer (C#,MVC,ASP.NET,SQL)

£30000 - £40000 per annum + Bonus+Benefits+Package: Harrington Starr: C# Web d...

Day In a Page

A new Russian revolution: Cracks start to appear in Putin’s Kremlin power bloc

A new Russian revolution

Cracks start to appear in Putin’s Kremlin power bloc
Eugene de Kock: Apartheid’s sadistic killer that his country cannot forgive

Apartheid’s sadistic killer that his country cannot forgive

The debate rages in South Africa over whether Eugene de Kock should ever be released from jail
Standing my ground: If sitting is bad for your health, what happens when you stay on your feet for a whole month?

Standing my ground

If sitting is bad for your health, what happens when you stay on your feet for a whole month?
Commonwealth Games 2014: Dai Greene prays for chance to rebuild after injury agony

Greene prays for chance to rebuild after injury agony

Welsh hurdler was World, European and Commonwealth champion, but then the injuries crept in
Israel-Gaza conflict: Secret report helps Israelis to hide facts

Patrick Cockburn: Secret report helps Israel to hide facts

The slickness of Israel's spokesmen is rooted in directions set down by pollster Frank Luntz
The man who dared to go on holiday

The man who dared to go on holiday

New York's mayor has taken a vacation - in a nation that has still to enforce paid leave, it caused quite a stir, reports Rupert Cornwell
Best comedians: How the professionals go about their funny business, from Sarah Millican to Marcus Brigstocke

Best comedians: How the professionals go about their funny business

For all those wanting to know how stand-ups keep standing, here are some of the best moments
The Guest List 2014: Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks

The Guest List 2014

Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks
Jokes on Hollywood: 'With comedy film audiences shrinking, it’s time to move on'

Jokes on Hollywood

With comedy film audiences shrinking, it’s time to move on
It's the best of British art... but not all is on display

It's the best of British art... but not all is on display

Voted for by the British public, the artworks on Art Everywhere posters may be the only place where they can be seen
Critic claims 'I was the inspiration for Blanche DuBois'

Critic claims 'I was the inspiration for Blanche DuBois'

Blanche Marvin reveals how Tennessee Williams used her name and an off-the-cuff remark to create an iconic character
Sometimes it's hard to be a literary novelist

Sometimes it's hard to be a literary novelist

Websites offering your ebooks for nothing is only the latest disrespect the modern writer is subjected to, says DJ Taylor
Edinburgh Fringe 2014: The comedy highlights, from Bridget Christie to Jack Dee

Edinburgh Fringe 2014

The comedy highlights, from Bridget Christie to Jack Dee
Dame Jenny Abramsky: 'We have to rethink. If not, museums and parks will close'

Dame Jenny Abramsky: 'We have to rethink. If not, museums and parks will close'

The woman stepping down as chair of the Heritage Lottery Fund is worried