Greece has featured several times in George Osborne’s narrative about the UK’s public finances. He likened Britain’s rising debt levels to those of Greece in his 2010 budget and repeated the same warning in his latest budget speech.
But while it was possible in 2010 to mention both countries in the same breath after they both had annual public spending deficits in double digits, the situation now is quite different.
Debt
Athens has accumulated a debt mountain of 175% of GDP compared with a UK debt total that is expected to hit 80% of annual income, which is comparable with France and Germany.
GDP
Britain’s GDP has recovered to a point where it is higher than in 2010, whereas the Greek economy remains 25% below where it was before the financial crash.
Unemployment
Unemployment in Britain and Greece was rising in 2010. However, the rate has since come down to 5.5% in the UK against a stubbornly high 25% in Greece and a youth unemployment rate of 51% that compares with 16% in the UK.
Interest rates
Greece cannot raise money on the international markets to finance its debts because if it tried, and let’s just say the current crisis is solved, the interest rate would be too high – at 20% or more. Britain’s status as a safe haven means it can raise 10-year bonds at an interest rate of about 2%.
Currency
Greece must rely on the European Central Bank to print euros if it runs short. Athens has found out the hard way that the support of the ECB can be limited when times are tough. Britain has its own central bank, which can be called upon to print money to get out of a sticky situation. The Bank of England has spent £375bn buying UK government bonds and is a key reason the UK is considered a safe haven.
