I recently read an article where British ‘austerity’ is compared to that of countries in the Eurozone. With the current economic crisis across the Eurozone and the UK it is amazing that many economists are applying one set of rules to countries in the Eurozone and another to Britain. Countries such as Greece are being criticized for not being harsh enough and Britain is being condemned for not doing enough to ease the economic crisis.
Although the UK has not signed the “Fiscal Compact” which forces countries in the Eurozone to adopt the ‘balanced budget rule’ where the annual deficit has to be a maximum of 0.5% of GDP, Britain still has a deficit which we need to reduce. Countries which did sign the ‘Fiscal Compact’ have to reduce their GDP by an average of one twentieth per year until they are back below the 0.5% threshold. Britain is set to increase their GDP over the next four years, reaching a peak at 100.8% in 2016/17.
So what would happen if Britain was following the trends of the Eurozone? Well, we would have been faced with the “Troika” which is a modern version of the Spanish Inquisition and all citizens would be subjected to huge cuts in wages and pensions, increases in tax and further breakdown of public services.
The lack of growth in Britain has ruined the government’s attempts to improve the nation’s debts and the strategy to reduce the country’s debts has basically come to a standstill. Although Osborne has been criticized for attempting to balance the debts of the country by slowing the deficit reduction program to smooth the economic adjustment he is doing the best he can under the circumstances.