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European Commission sees galloping UK debt crisis
Britain's public debt will explode to 180pc of GDP within a decade unless future governments take drastic measures to restore fiscal probity, according to a confidential study by the European Commission.
The projection is more than twice the level forecast by the UK Treasury, which expects the debt to peak at around 80pc before gradually falling as growth revives and tax revenues come back to life.
What is shocking is that UK risks decoupling from the other major economies in Europe, vaulting past Germany, France and even Italy into a wholly different league. Ireland is in the worst shape, with debt projected to reach 200pc of GDP.
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Stephen Lewis, chief strategist at Monument Securities, said that once public debt goes much above 100pc of GDP it becomes hard to reverse. "The debt snowballs because interest costs alone push up the deficit, so you can race up to 180pc very fast."
Attempts to bring the debt down by a spending squeeze can prove counter-productive because lack of growth itself drives the deficit higher. "Once you get there your trapped," he said.
Britain's debt briefly touched 252pc of GDP after World War Two, but the circumstances were then entirely different. War-time spending could be slashed instantly and the demographic balance of young and old was still positive.
Debt anywhere near 180pc of GDP today would test the UK Gilt market to destruction. While Japan is still able to fund an even higher level of debt without paying exorbitant rates, it is does not depend on foreigners to cover the bond auctions.
http://www.telegraph.co.uk/finance/f...bt-crisis.html
Britain's public debt will explode to 180pc of GDP within a decade unless future governments take drastic measures to restore fiscal probity, according to a confidential study by the European Commission.
The projection is more than twice the level forecast by the UK Treasury, which expects the debt to peak at around 80pc before gradually falling as growth revives and tax revenues come back to life.
What is shocking is that UK risks decoupling from the other major economies in Europe, vaulting past Germany, France and even Italy into a wholly different league. Ireland is in the worst shape, with debt projected to reach 200pc of GDP.
...
Stephen Lewis, chief strategist at Monument Securities, said that once public debt goes much above 100pc of GDP it becomes hard to reverse. "The debt snowballs because interest costs alone push up the deficit, so you can race up to 180pc very fast."
Attempts to bring the debt down by a spending squeeze can prove counter-productive because lack of growth itself drives the deficit higher. "Once you get there your trapped," he said.
Britain's debt briefly touched 252pc of GDP after World War Two, but the circumstances were then entirely different. War-time spending could be slashed instantly and the demographic balance of young and old was still positive.
Debt anywhere near 180pc of GDP today would test the UK Gilt market to destruction. While Japan is still able to fund an even higher level of debt without paying exorbitant rates, it is does not depend on foreigners to cover the bond auctions.
http://www.telegraph.co.uk/finance/f...bt-crisis.html
What happened to the Telegraph? Now believing projections from the EU ?