Will the UK follow Greece’s Financial Crisis?

Some believe UK is going to follow Greece’s economic pitfall. There are several reasons, however, why UK could resist.

Both countries’ deficits are scarily similar: Greece is at 13.6%, and UK—at 11.5%, as the maximum an EU member should have is 3%. Both governments are not quite clear how they plan to reduce these numbers to the accepted limit.

UK, however, has a strong bet, and that is its own currency—the pound, which gives it independence.

“It UK could, if it wanted to, devalue its currency, and that would relieve some of the pressure,” Jeremy Batstone-Carr, research analyst at Charles Stanley, said.

On the contrary, Greece along with other countries such as Spain, Portugal and the Irish Republic, don’t have this flexibility. That is why these countries are considered to be at a greater danger than the UK.

In addition, Greece is in a deep economic depression with close to none signs of recovery, unlike UK, which showed improvements at the end of 2009 and continued to grow until March this year.  UK is also predicted to continue to grow–slowly, but surely.

Another difference between the two countries is the level of debt. UK’s 60% debt might be considered high, but when compared to Greece’s 115%, it actually seems low.

The type of debt is also important for a country’s economic situation. UK’s debt does not have to be repaid in several years (as it was accumulated from recent loans), meaning it does not have to use the money markets to refinance its debt.

“That’s Greece’s problem and other countries’ too,” the BBC economics editor, Stephanie Flanders, said, per news.bbc.co.uk. “They have to keep going to the markets. We’re actually in a very strong position on that.”

Related posts

Leave a Comment

five × five =