Global shares have tumbled after the credit rating agency Standard and Poor's downgraded Greek debt to "junk" on Tuesday.

 

This is usually what happens to banana republics.

 

With Greece now being charged over 11% for its loans, what hope has it in repaying its debts let alone the interest without making absolutely massive cuts in public spending.

 

Even Portugal and possibly Spain are on the slippery slope and could follow Greece.

 

The implications for Europe are huge, especially those in the Eurozone.

 

 

 

Could this happen to the UK if we don't seriously address the massive debts we have built up. There is no doubt the politicians are in denial to the scope of the problem, thay are afraid to tell us the truth because they perceive we don't want to hear how bad things are, so they won't tell us.

 

I think there will have to massive cuts in expenditure and tax rises to arrest the problem, but no one seems to be worried in this Country,and it won't really mater which party wins the election, they will all face the same problem.

 

Yes a growing economy will help, but growth will have to 5% a year minimum to make any significant difference, and at the moment that seems highly unlikely.

 

So every single item the Government spends money on will have to cut back, this is not a case of ordering less paperclips.

 

So we better wake up, as very soon we will all get a reality check.

Edited April 28, 201015 yr by brian91

In short what has happened with Greece is what will happen with the UK, should Labour win the next election and continue to ignore the growing debt; whilst failing to address making public sector cuts (job losses; pay freezes; hours cut) because they are under the thumb of "the new Scargill" Bob Crow.

 

As he said on Radio 5 Live this morning:

 

There was a warning of Greek-style chaos from today, from Bob Crow, the hardline leader of the Rail, Maritime and Transport union.

 

“At last the truth is out and the election has shifted to the £50 billion cuts legacy from the bankers bailout which the politicians are lining up in secret for the UK’s public services," Mr Crow said.

 

“There is no question that there will be widespread strike action as workers in health, education, transport, the fire service and across the whole spectrum of public services fight back against the full force of the attacks which will be unleashed after polling day.

 

“If you want a snapshot of what we are facing take a look at what’s happening in Athens today. Junk status, key services ripped to shreds and workers on the streets. Greece today - UK after May 6.”

 

Somehow after that incident today in Rochdale which was as funny as a plotline in the political satire The Thick Of It; even I'm now having doubts this will happen.

 

Although after Mr Crow's threat, maybe it was deliberate gaffe to distract this from the front of tomorrow's newspapers?

Like Alistair Darling said, comparing the UK to Greece is economic illiteracy. Even though we do have a higher deficit, we still have a AAA credit rating. And most of our debt bonds don't mature for a few years yet (because most of our debt has been racked up very recently) - whereas Greece's debt bonds are maturing NOW, becuase their financial problems have been going on for a much longer time.

 

We're definitely safe for the near future, but it is true that the deficit IS going to have to be addressed quite soon, and there IS going to need to be severe spending cuts - and, like that institute has said, all the parties are as bad as eachother in not spelling out where the cuts will be. But I don't believe it's time to bring in those cuts quite yet, because we're still perilously close to going back into recession, and that would be the worst thing. Hopefully, by the beginning of next year, the GDP will be a bit more healthy, and that's when the time for cuts will come. And i frankly do trust Lib Dems and Labour far more than the Tories in economic management - the Tories wanted to bring in cuts right when the recession hit, which every other major party in the WORLD agrees would've been a disaster. They just wouldn't know what they were doing.

Like Alistair Darling said, comparing the UK to Greece is economic illiteracy. Even though we do have a higher deficit, we still have a AAA credit rating. And most of our debt bonds don't mature for a few years yet (because most of our debt has been racked up very recently) - whereas Greece's debt bonds are maturing NOW, becuase their financial problems have been going on for a much longer time.

 

We're definitely safe for the near future, but it is true that the deficit IS going to have to be addressed quite soon, and there IS going to need to be severe spending cuts - and, like that institute has said, all the parties are as bad as eachother in not spelling out where the cuts will be. But I don't believe it's time to bring in those cuts quite yet, because we're still perilously close to going back into recession, and that would be the worst thing. Hopefully, by the beginning of next year, the GDP will be a bit more healthy, and that's when the time for cuts will come. And i frankly do trust Lib Dems and Labour far more than the Tories in economic management - the Tories wanted to bring in cuts right when the recession hit, which every other major party in the WORLD agrees would've been a disaster. They just wouldn't know what they were doing.

 

I disagree. The problem lies squarely on this Labour administration bias and mismanagement towards the Public Sector which is bleeding the enterprising Private Sector (which has historically led this country out of recession) dry. As this Labour administration is under the thumb of Bob Crow and his Left-wing Union cronies:

 

Record gap between public and private sector pay

The gap between public and private sector wages has hit a record level, according to official figures.

Independent.co.uk

By Harry Wallop, Consumer Affairs Editor

Published: 6:30AM GMT 21 Jan 2010

 

Workers in the public sector are now being paid more than £2,000 extra a year compared with employees in the private sector, after public sector pay continued to race ahead of inflation.

 

The average public sector worker was paid £23,660 a year, compared with private sector workers who were paid £21,528 a year, in the three months to the end of November.

 

This is the first time that the gap, which has slowly widened under the Labour Government, has hit more than £2,000 and came as figures showed that the discrepancy between pay increases in the public and private sector had never been so wide.

 

The data from the Office for National Statistics (ONS) prompted experts to warn that so far the private sector had borne the brunt of the recession and that the Government needed to take action sooner rather than later to tackle the growing public sector wage bill.

 

"Public sector pay has exploded out of control," said David Frost, the director general of the British Chambers of Commerce.

 

The figures were published as part of the ONS monthly update on unemployment and wages, with many pleasantly surprised that the overall unemployment figure had dropped a by 7,000 to 2.46 million for the three months to November. Some are hopeful that unemployment, which many feared could climb well above 3 million, could peak at little more than 2.5 million.

 

However, the data on wages were far less encouraging, with average pay increases across all workers increasing by just 1.1 per cent, the lowest level since records began nine years ago.

 

Nearly all of the increase came from the public sector, with nurses, teachers, civil servants and other public workers enjoying an average annual pay rise of 3.8 per cent in the three months to the end of November. Meanwhile private sector employees saw their salaries rise by just 0.2 per cent, as thousands of firms froze their workers' pay as part of a desperate bid to cut costs in the recession.

 

This gap of 3.6 percentage points is the widest ever recorded by the ONS.

 

John Philpott, the chief economist at the Chartered Institute of Personnel and Development, said: "I can understand the unease many private sector workers feel when they see their contemporaries in the public sector not only getting better conditions and pensions, but also better pay.

 

"But everyone knows the public sector gravy train is going to be derailed."

 

Shadow Chief Secretary to the Treasury Philip Hammond said: "We have the largest deficit in the G20 and no credible strategy to get a grip on it, which is threatening higher mortgage rates and higher borrowing costs."

 

Experts gave warning that the dire state of the public finances meant that public sector pay increases had to stop.

 

Corin Taylor, policy director at the Institute of Directors, said: "The private sector has responded very flexibly to the recession by cutting pay and freezing wages. And that has helped people stay in a job.

 

"The public sector has got to follow suit. The Government has no choice. It is borrowing £178 billion this year and it is coping with the largest peacetime deficit. Something has to give. There will have to be a public sector pay freeze or public sector pay cuts. It will be painful but it is necessary."

 

The public sector has continued to take on new workers in recent months, the statistics showed, with 6.09 million people employed by the taxpayer compared with 5.8 million a year ago.

 

Both the NHS and Jobcentre Plus have been hiring more people, even though Alistair Darling has admitted cuts will have to be made to the public payroll.

 

Over the last year, despite, last month's recovery, 723,000 jobs have been shed from the private sector.

 

Mr Frost said: "This just isn't sustainable. My members are telling me that they are losing workers to the public sector, because not only can they see the better holidays and pensions, but also now the better pay.

"The wealth-creating private sector is losing out to the public sector. And we will have to pay for this – through higher taxes. We've got to get a grip."

 

For many years public sector workers were paid less than those in the private sector, with workers willing to accept lower pay in return for greater job security and better pensions. However in the last decade public sector pay has increased at a far greater rate, with GP partners now earning £107,000 a year and many head teachers in secondary schools paid more than £100,000.

 

This is the number one reason why many long time working class Labour voters like myself who work in the private sector, will be voting for the Party who is going to put a stop to this. Because I'm sick to death of mates who work for the Council; etc bragging about their skiving off at work; looking at things on the internet; taking sickies; are on Final Salary schemes to retire at 65 (or 60) etc; when I have to work hard; have a pay freeze; no overtime (even though my job can't be done properly in the 35 working hours I'm paid for); have been through three department reshuffles which have resulted in many of my colleagues losing their jobs. Whilst I'm sick of the same councils ludicrously voting for pay increases to line their own nest at the expense of the law abiding tax payer.

 

And then you have the likes of fukkin Bob Crow threatening to call the country to ransom if the Conservatives get in.

 

In this case "Greece is the word" if we have another Labour Administration.

Debt crisis: UK banks sitting on £100bn exposure to Greece, Spain and Portugal

 

Fears of a fresh banking crisis stalked the markets today as the risk of Greece defaulting on its debt repayments raised concerns about the exposure of major banks to indebted countries in Europe.

 

As analysts estimated that Britain's banks have a combined exposure of £100bn to Greece, Portugal and Spain – the three countries causing most concern on the financial markets – the Financial Services Authority was closely watching the markets and assessing exposures to the vulnerable countries.

 

After the ratings agency Standard & Poor's had downgraded Greek debt to "junk" yesterday, bank shares were knocked today but spared further falls as the downgrade of Spain's crucial credit rating came just as the stock market was closing. With UK banks standing to lose more in Spain than in Greece and Portugal, analysts said there might have been a more severe reaction if London had remained open longer today.

 

Analysts at Credit Suisse calculated that UK banks had £25bn of exposure to Greece and Portugal but £75bn to Spain, where the collapse in the property market has already forced banks such as Barclays to admit to bad debt problems and left Royal Bank of Scotland facing questions about its exposure.

 

"Lloyds' exposure to the three regions is likely to be negligible, we estimate that Barclays has £40bn exposure (predominantly loans in Spain and Portugal, excluding daily positions in Barclays Capital), and RBS has around £30bn–£35bn (again predominantly Spain, although we estimate £3bn to £4bn in Portugal and Greece as well)," the Credit Suisse analysts said.

 

Money markets, in which major banks lend to each other, also reflected the tension caused by the Greek downgrade with eurozone interbank lending rates enduring their biggest rise in nearly a year.

 

Much of the anxiety was targeted at French, German and Swiss banks. Howard Wheeldon, of BGC Partners, said: "If Greece defaults that means the pressure will then be felt and exerted on national banks that hold the Greek debt. That includes very many German, French and Swiss banks and it just may be that with so many banks involved one of these might just go down."

 

At today's annual meeting, RBS's chairman, Sir Philip Hampton, played down any exposure to Greece, while Lloyds' finance director, Tim Tookey, said on Tuesday that the bank had no "material [significant] exposure". Barclays publishes a trading update on Friday and will face questions about its exposure to the countries being downgraded.

 

In early trading today banks were the biggest fallers, with RBS tumbling 7%, Lloyds down by 6.5% and Barclays off 4%, though they recovered much of their losses by the time market closed.

 

Among continental European banks, analysts at Evolution calculated that Fortis, Dexia, CASA and Société Générale were most affected because of the value of their Greek debt holdings relative to their size.

 

According to Barclays Capital, UK banks account for only 3% of the exposure to Greek bonds, while data from the Bank for International Settlements shows that, at the end of 2009, Greece owed about $240bn (£160bn) overseas. Of this, France and Germany have the biggest exposures of $75bn and $45bn respectively.

 

Analysts expressed concern about the problems spreading. Daragh Quinn, banks analyst at Nomura, said: "Given the scale of the debt problem facing Greece, the prospect of some kind of debt rescheduling or even default are being considered as possibilities by the market. Sovereign risk concerns are also spreading to Portugal and Spain."

 

Only last week the International Monetary Fund, which has been called in to help fund the Greece deficit, warned about the impact of a sovereign risk crisis. "Concerns about sovereign risks could undermine stability gains and take the credit crisis into a new phase, as nations begin to reach the limits of public-sector support for the financial system and the real economy," the IMF said.

 

Credit Suisse analysts pointed out that not all the problems facing the markets were negative for the banking sector. "The increase in volatility should assist revenues at the investment banks, particularly for primary dealers like Barclays," the Credit Suisse analysts said.

 

"But there are clearly a number of important potential negatives. These include the potential for increased capital and liquidity trapping in affected sovereigns, or increased micro prudential requirements for local subsidiaries. Our bigger concern, however, is increased nervousness towards the UK," they added.

 

Source: The Guardian

So, if Greece defaults some of the UK banks will take a huge hit, as if they are not in enough debt already.

Greece has a deficit far, FAR in excess of ours (on a relative scale) - like 116% of GDP compared to about 60% of GDP for the UK. And cuts are forecast to be made by Labour, just in 2011. And Greece doesn't have control of the euro and as such is unable to stimulate demand via interest rates and money supply. Comparisons between the UK and Greece are, as Darling said, pure economic illiteracy.

Greece is "on the brink of the abyss", President Karolos Papoulias has warned, after three people died during protests over planned austerity measures.