Saturday, 4 December 2010

Europe and the UK economies - room for cautious optimism

If you believe everything the right wing papers and the Labour party say, you will believe that Europe is an economic disaster zone that is going to descend into chaos and that the UK has gone from a visionary economy into a basket case that must get even further into debt just to stop a complete meltdown. Strangely this total change in the UK economy apparently happened in early May 2010.

But strangely, the economic figures keep coming in which contradict this.

In Europe, yes the economies of the delightfully named “PIGS” - Portugal, Ireland, Greece and Spain look in trouble. But the first three are very marginal in terms of the Euro zone and only account for 5% of the EUs economy. One would have to ask if the Euro is such a bad idea, why Estonia is joining in January.

In the mainstream of the European economy its powerhouse, Germany, has posted quarterly growth figures of 9.5% and 3.9%. Poland is on 5.3% and other countries are posting strong recoveries to get them back to the level where they started at the beginning of the problems.

Even Britain, which suffered such setbacks over the past few years, has posted growth well above predicted levels. Seen in this light, Lib Dem support for spending cutbacks earlier than we thought prudent earlier in the year seems like a sensible change in approach. Fingers crossed but it looks like the Euro zone will be OK and the UK will grow enough to stand cutting public sector spend back to the levels of 4 years ago.

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