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
News
Disruption at Waterloo after a person was hit by a train
newsCancellations and disrupted service after person hit by train
Arts and Entertainment
music
Arts and Entertainment
The almost deserted Liverpool Echo Arena on Monday
tvCan X Factor last in the face of plummeting numbers auditioning
News
Kirsty Bertarelli is launching a singing career with an album of songs detailing her observations of “real life”
news
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
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: Financial Adviser

£20000 - £60000 per annum: Recruitment Genius: Are you recently QCA Level 4 qu...

SThree: Graduate Recruitment Resourcer

£20000 - £22500 per annum + OTE £30K: SThree: SThree Group have been well esta...

Guru Careers: Application Support Analyst / 1st Line Support

£25 - 30k: Guru Careers: We are seeking an Application Support Analyst / 1st L...

Guru Careers: .NET Developer / Web Developer

£45K - £55K (DOE) + Benefits: Guru Careers: We are seeking a full stack .NET D...

Day In a Page

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

How a costume drama became a Sunday night staple
Miliband promises no stamp duty for first-time buyers as he pushes Tories on housing

Miliband promises no stamp duty for first-time buyers

Labour leader pushes Tories on housing
Aviation history is littered with grand failures - from the the Bristol Brabazon to Concorde - but what went wrong with the SuperJumbo?

Aviation history is littered with grand failures

But what went wrong with the SuperJumbo?
Fear of Putin, Islamists and immigration is giving rise to a new generation of Soviet-style 'iron curtains' right across Europe

Fortress Europe?

Fear of Putin, Islamists and immigration is giving rise to a new generation of 'iron curtains'
Never mind what you're wearing, it's what you're reclining on

Never mind what you're wearing

It's what you're reclining on that matters
General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

Chuka Umunna: A virus of racism runs through Ukip

The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
Yemen crisis: This exotic war will soon become Europe's problem

Yemen's exotic war will soon affect Europe

Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
Marginal Streets project aims to document voters in the run-up to the General Election

Marginal Streets project documents voters

Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

The real-life kingdom of Westeros

Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
How to survive a social-media mauling, by the tough women of Twitter

How to survive a Twitter mauling

Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

At dawn, the young remember the young

A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

Follow the money as never before

Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

Samuel West interview

The actor and director on austerity, unionisation, and not mentioning his famous parents
General Election 2015: Imagine if the leading political parties were fashion labels

Imagine if the leading political parties were fashion labels

Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence