By: Mike Campbell
The UK general election will take place in May and the Clintonian truism “It’s the economy, stupid” will ring out loud and clear over the land. However, against the backdrop of the global financial crisis and the weak recovery that is taking place in the UK, debate is likely to be sharper than usual.
The UK did not abandon Sterling in favour of the Euro and it is clear that joining the Eurozone any time soon is right off the political agenda. The UK has its own debt problems.
The Greek crisis has been triggered by the failure of the previous government to come clean about the problem as much as the fact that the deficit is 12.5% of GDP and the public debt is running at almost 113% of GDP.
The UK deficit is a shade larger in percentage terms than the Greek deficit at 13%, but since the UK economy is much bigger than the Greek economy, the absolute amount of UK fiscal deficit is higher. The UK debt burden in 2009 was estimated as almost 69% of GDP.
There is no serious suggestion that the UK will default on its debt repayments, but reducing the deficit and the UK debt are featuring in the election rhetoric of all the mainstream political parties. The government thinks that by halving the deficit within 4 years, the UK recovery will be protected.
The opposition Conservative party claim that a sharper reduction would support the UK recovery. In the meantime, the EU commission have fanned the flames by suggesting the UK government plans are not sufficiently ambitious to meet the target of a 3% of GDP deficit by 2015 which was agreed by EU finance ministers last year.