Greek travails

Greece is in the headlines again as it seeks more time to implement the austerity measures it agreed to as a condition of its latest bailout.  Despite resistance, it is reported as likely it will get more time.  The alternative, a 'Grexit', is not something Eurozone leaders wish to contemplate, as least for now.  Meanwhile, there is much speculation about what action the ECB might take with regard to Spanish and Italian government debt; earlier comments from the ECB President suggest the ECB will need some movement from Eurozone governments before it acts.

 

The UK is insulated by having its own currency but policy failure in the Eurozone could lead to further declines in GDP (and demand for UK products) and if the Euro fell against sterling that would present UK policy-makers with an additional dilemma as UK products would be more expensive to Eurozone importers.

 

Rather than wait for something to turn up, Micawber-like, the UK government needs to take action itself to help stimulate demand, particularly investment demand.

 


Stephen Beer, 22/08/2012

 
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