The Ernst and Young Item club is not the kind of club where you might find a glitter ball, and this week it is definitely not running a happy hour. The economic forecasting body does, however, have something of a crystal ball, through which they have cut their predictions for UK growth, thinking output will rise by just 0.9% this year, and by 1.5% by 2012. They base their assertions on the Treasury’s own model of the economy, which to all intents and purposes could do with a lot more glue.
The downgrade is based upon the seemingly inevitable ejection of Greece from the back door of the Euro club, the bouncers calling a cab for Ireland and Portugal too. It is felt that the current crisis in the Euro-zone could push Britain’s gross domestic product down to levels below those reached in the recession of 2008/2009. So basically, things are bad, and likely to be worse than the last time they told us things were bad.
The G20 leaders met in Cannes over the weekend, nice work if you can get it, but failed again to agree a comprehensive plan to effectively underwrite the single currency. A trillion Euro rescue package might have allayed fears, had France and Germany been able to say how it would be funded. Angela Merkel was left looking for change down the back of the sofa, and Carla Bruni will be sent out busking.
David Cameron is looking increasingly frustrated with his counterparts from mainland Europe. Not technically part of the team of course, he was heckling from the G20 sidelines, like a Sunday league football Dad this weekend. He said “the world can’t wait for the Eurozone to go through endless questions and changes.” He has a point. The combined might of the collected ministerial grey matter on offer in Cannes sadly went home with still more questions than answers, but change is long overdue. One modification that might help however is a new hand on the tiller in Italy. Prime Minister Silvio Berlusconi has finally stated that he will resign after austerity measures are passed to bolster the country’s beleaguered balance sheet. Not before time. He has been gripping so tight to his prime position I’d be surprised if he can still feel his fingers.
So, Greece may be the first to get the Drachmas out of the attic, will the Lira and the Punt be dusted down thereafter? Of course, if Greece’s ID had been properly checked before they had time to set up a bar tab, then their neighbours might not have been left paying it. You can get into trouble for getting a tax disc under false pretences, what is the fine for an entire financial system? Eyes will roll, but let’s face it, heads probably won’t.