Austerity? No thanks we're Greek!

No great surprise here, two electorates have voted for a government that has offered less of the above. 

Scrooge - literature's most famous austerity character.

As I said it is no great surprise that two countries have effectively voted down austerity measures. To not do so would be like Turkeys voting for Christmas. 

The argument for and against is boiling down to growth. That is the new buzz word. 

I was listening to a radio debate one Friday night as I drove down to the South Coast. There was a lot of support in the audience for cuts in Government spending as we couldn't afford the borrowing anymore. There was a second argument that without growth in the economy you just cut the economy. How to governments encourage growth? Generally they appear to borrow. As long as you economy is growing borrowing is OK. By the time it come to pay the debt your economy is at such a place that the repayment is effectively smaller.

It would seem the UK is caught in a spiral of stagnating economy requiring more borrowing. This governments borrowing is now greater  than when they took office 2 years ago. So far it would seem the soothsayers who said austerity as proposed by the Conservatives would lead us further down into the pit.

Official figures currently put the UK GDP at some 75% of what it was in 2008. This means the government effectively has 25% less income than it had 4 years ago. To balance that borrowing the spending cuts would have to be so savage their would be trouble with a capital T.

I have said it before and I will say it again this government needs to get on with growth. Growth, growth and more growth. I think the plan thus far was for the economy to recover by itself but the negative atmosphere put about by a slash and burn government has resulted in business playing a long game. 

I have no problem with reeling in the government spending but at the moment I believe they have put the cart before  the horse. Once the economy is growing again and the money is starting to tumble in THEN you go for austerity. At present all the government are doing is stalling the recovery. 

I think this is just like a repeat of a post I made earlier.

The world of national economics appears to be in two halves - The Keynesian's and the Monetarists. The former believe governments can influence growth by spending and the monetarists think money supply should be controlled at all costs. It sort of worked for Thatch but she had oil profits coming out of her gills so she could afford it.

The coalition in this country don't have that so much these days. but one thing the government should not be doing is more of the same. Spending cuts. I am going to stick my neck out here and say that I don't think we will see much growth over the course of this Government. 

Back to Austerity and the Greeks. You can understand why they voted the way they did. No one is going to  willingly vote for the kind of draconian cuts that Greece has got to make for the terms of the EU bail out. That said the Greeks did have a rather profligate spending policy. By draconian I actually meant the amount of funding  that was to be slashed from what it was, which is relative. I think the Euro is doomed in the long term. Greece will bail out followed by Spain and maybe Ireland. there is a case in point. 

Apparently the Irish fell into the recession gap. They carried out all their budget cuts as asked but had assumed a degree of growth would come from somewhere. When it didn't the hole they were  trying to dig themselves out of got a little deeper.

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