If Britain Were Greece

Radio 4’s Broadcasting House asked me to imagine the consequences of Greek austerity, if translated to Britain. This is what I said:

If Britain were Greece ….

We would be in the middle of the longest and deepest recession in the modern era, much worse than the Depression years of the 1930s, with no end in sight.
Unemployment would be nearly 7 million, more than a fifth of the workforce, 2.5 million of it among young people. Half of our young people would be out of work.

If Britain were Greece ….

Workers, particularly low-paid workers, would be about to be hit by a lot of pain. The minimum wage would be cut from £6.08 to £4.74, while the rate for young people would be cut from £4.98 to £3.39.
More than 100,000 public sector workers would be put into “reserve” – a waiting room for redundancy – and their salaries immediately cut by 40%. Well over a million public employees would be sacked by 2015. All public sector workers would see their wages, not just frozen, but cut sharply.

If Britain were Greece …

VAT would got up to 24%, we’d pay a “solidarity” levy of up to 5% of income, and new taxes on property. Alcohol and tobacco duties would go up by a third and we’d pay roughly £2 a litre for petrol and diesel: £120 to fill the tank of a family saloon. Anybody with a yacht or luxury car would pay extra tax on it.

People with a state or public sector pension above £800 a month would see it cut by 20%. Anybody with a pension above that level who had retired before the age of 55 would see it cut by 40%. Early retirement would become a thing of the past. The equivalent of Greece’s retirement age increase in Britain would be a rise in the state pension age to well over 70. All state benefits would be cut for years and be strictly means-tested..

If Britain were Greece ….

The defence budget would be slashed by a fifth – in cash – drastically reducing the number of military personnel and making it hard to maintain the army, navy and air force as viable separate services. NHS spending, instead of being ringfenced, would drop by a sixth. Treatments would be withdrawn, dozens of hospitals would be cut and tens of thousands of medical staff would lose their jobs. Education spending would not escape the axe, necessitating the merger or closure of thousands of schools and huge redundancies among teachers and support staff.

If Britain were Greece ….

We wouldn’t even have the weather to ease the gloom.

This post originally appeared at David Smith’s EconomicsUK and is posted with permission.

6 Responses to "If Britain Were Greece"

  1. rodeneugen   February 26, 2012 at 11:31 pm

    This situation did not appear out of the blue. It is result of years of mismanagement by the Greek politicians, and do not say they were not warned. I haven't seen any of them put on trial. I wonder, all these politicians have immunity?

  2. Frank   February 27, 2012 at 4:31 pm

    If Britain were Greece, then the US would be the equivalent of Italy. If Britain were Greece,one would wonder how the international markets allowed Britain to borrow so much, for so long at such a low cost? If Britain were Greece, then the corruption of government and the pervasiveness of blatant tax fraud would be so great as to question the rule of law. Let's get real – Greece is Greece because it is Greece.

  3. Stray__Cat   February 27, 2012 at 9:29 pm

    @Frank and rodeneugen:

    Sad to see that you both believe to the mainstream narrative about Greece. Greece wasn't mismanaged, it was forced to enter the Euro while having a not compliant economy by German pressure. Germany in the last 10 years lent to Greece to finance her export to Greece, gaining competitive advantage by lowering real wages by Hartz I to IV packages and running a lower inflation than the rest of the euro area.
    Now, at the burst of the bubble, Germany is blowing the "coup the grace" to transform the country in an European version of Vietnam.

    • rodeneugen   February 28, 2012 at 6:00 am

      Who said the Greeks are solely responsible for the economic grievances of Europe, yet it is the only country out of the P.I.I.G.S. who has got by now 50% discount on its debts and it is still not enough.

      a. The first main problem of the world economy is not Greece but USA, with its huge imbalance of current account, that is still accumulating, and nobody sees end to it. When the 2007 bank crisis sub-prime started, it was hardly mentioned, that actually the sub-prime system of selling balks of credits, wrapped into attractive wrappings, was actually a financial system how to bring back to US economy the US dollars from the exporting countries like Japan and China. Conclusion, all the collapse of the banking system of 2008 is default of US economy. Since then, some measures have been taken, but still the current account ended in 2011 with deficit of 600 billion US dollars up from 470 billion at 2010 figures. Greece?!?, not even rolls for breakfast compared to US dinner.

      b. Fortunately Europe doesn’t have the same problem of current account, but it is due to the northern countries, while all the surpluses on current account that they generate is wasted mainly in Greece and some in Portugal, Spain and Italy see the following graph.

      You may say all this helped German economy to find markets for its products. But there is a big BUT. As a payment for their products they got Greece governments bonds, that have to be write of now. This not only reduces the credit rating of Germany, (unfortunately credit is not valuated just by cash flow but also by net asset value, that was deeply damaged by the write offs.), but damaged the German pension funds too. You may say you don’t care about the German or French banks or other capitalistic institutions, but i hope you can`t say the same about the German workers, who lost their pensions in sake of supporting the Greek waste and consumption society, without to blush.

      c. The world economy is changing in front of our eyes, and nothing can be done about it. The highly industrious, highly committed, young enthusiastic Asian people want their share from the world economic cake and the less industrious, less committed, old Europeans have to give up some of their economic privileges achieved in the past. This process is unfortunately painful and politically very hard to implement and those who are most vulnerable pay the highest price. (Greece)

      To conclude. Nobody is blaming the Greeks, that they grabbed, what others gave them voluntarily in the past. All we want is, please realize, the free party is over, the time come to pay. You want Drachma?, have it, You want out of EU, go, You want to stay, be it, but don’t ask others to pay your lunch.

    • DiranM   March 6, 2012 at 8:49 am

      Very true, but the Greek political elite cling to the Euro like its is their lifeline. Despite the depression economic conditions, most Greeks prefer starvation to the drachma. Now admittedly this is very foolish, but it shows the extent of their brainwashing and foolishness. Let's face it, Greeks are in this mess because they had dumb policies. They like suffering and are happy about it.

  4. Deva Sagayam   February 28, 2012 at 5:16 am

    What you say can only be true if Britain in the past 20 years quadrupled public sector employment, doubled pensions, abolished all rail fare and let people travel free, generally enjoyed itself at the expense of EU and much maligned Germany.