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.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
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

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

SThree: Talent Acquisition Consultant

£22500 - £27000 per annum + OTE £45K: SThree: Since our inception in 1986, STh...

Recruitment Genius: Experienced Financial Advisers and Paraplanners

Negotiable: Recruitment Genius: This extremely successful and well-established...

Guru Careers: FX Trader / Risk Manager

Competitive with monthly bonus: Guru Careers: We are seeking an experienced FX...

Day In a Page

Seifeddine Rezgui: What motivated a shy student to kill 38 holidaymakers in Tunisia?

Making of a killer

What motivated a shy student to kill 38 holidaymakers in Tunisia?
UK Heatwave: Temperatures on the tube are going to exceed the legal limit for transporting cattle

Just when you thought your commute couldn't get any worse...

Heatwave will see temperatures on the Tube exceed legal limit for transporting cattle
Exclusive - The Real Stories of Migrant Britain: Swapping Bucharest for London

The Real Stories of Migrant Britain

Meet the man who swapped Romania for the UK in a bid to provide for his family, only to discover that the home he left behind wasn't quite what it seemed
Katy Perry prevented from buying California convent for $14.5m after nuns sell to local businesswoman instead

No grace of God for Katy Perry as sisters act to stop her buying convent

Archdiocese sues nuns who turned down star’s $14.5m because they don’t approve of her
Ajmer: The ancient Indian metropolis chosen to be a 'smart city' where residents would just be happy to have power and running water

Residents just want water and power in a city chosen to be a ‘smart’ metropolis

The Indian Government has launched an ambitious plan to transform 100 of its crumbling cities
Michael Fassbender in 'Macbeth': The Scottish play on film, from Welles to Cheggers

Something wicked?

Films of Macbeth don’t always end well - just ask Orson Welles... and Keith Chegwin
10 best sun creams for body

10 best sun creams for body

Make sure you’re protected from head to toe in the heatwave
Women's World Cup 2015: How England's semi-final success could do wonders for both sexes

There is more than a shiny trophy to be won by England’s World Cup women

The success of the decidedly non-famous females wearing the Three Lions could do wonders for a ‘man’s game’ riddled with excess, cynicism and greed
How to stop an asteroid hitting Earth: Would people co-operate to face down a global peril?

How to stop an asteroid hitting Earth

Would people cooperate to face a global peril?
Just one day to find €1.6bn: Greece edges nearer euro exit

One day to find €1.6bn

Greece is edging inexorably towards an exit from the euro
New 'Iron Man' augmented reality technology could help surgeons and firefighters, say scientists

'Iron Man' augmented reality technology could become reality

Holographic projections would provide extra information on objects in a person's visual field in real time
Sugary drinks 'are killing 184,000 adults around the world every year'

Sugary drinks are killing 184,000 adults around the world every year

The drinks that should be eliminated from people's diets
Pride of Place: Historians map out untold LGBT histories of locations throughout UK

Historians map out untold LGBT histories

Public are being asked to help improve the map
Lionel, Patti, Burt and The Who rock Glasto

Lionel, Patti, Burt and The Who rock Glasto

This was the year of 24-carat Golden Oldies
Paris Fashion Week

Paris Fashion Week

Thom Browne's scarecrows offer a rare beacon in commercial offerings