Uncomfortable Greek lessons

4 May 2010 By Ian Campbell

Crisis in Greece and other euro zone economies shows the UK was wise to stay out of the euro experiment. But the UK’s fiscal deficit, almost as bad as Greece’s and bigger than in Spain and Portugal, shows the UK is in a mess of its own and risks a debt downgrade all the same.

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The European Union and IMF have agreed to provide 110 billion euros to Greece in order to prevent a debt default. Greece has agreed to implement austerity measures.

Standard & Poor's downgraded Spain on April 28 to AA from AAplus, with a negative outlook, saying a longerthanexpected period of low growth could undermine efforts to cut the budget deficit. The rating agency also downgraded Portugal, after cutting ratings on Greece to junk level, expressing doubts about the country's ability to implement the reforms needed to alleviate its debt burden.

In Ireland, the Permanent TSB/ESRI House Price Index for the first quarter of 2010 showed a yearonyear fall in average Irish house prices of 18.9 percent. Average prices have returned to end 2002 levels and have dropped by 34 percent from their peak in the fourth quarter of 2006.

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