Now that the Greek General Election is out of the way we can focus on the UK one, which as we've been constantly reminded is less than 100 days away. As the focus on politics increases we can not only draw some comparisons to the Greek situation, but learn some lessons from them as well.
The first comparison is the most obvious and that both countries are heavily in debt and becoming more so by the day as they continue to run deficits (the amount a country spends beyond the amount it receives in taxes). Greece's total debt is dwarfed by the UK at around €315 billion compared to £1,500 billion, but a key measure is when these are compared to each country's GDP where the UK is on 90%, doing better with Greece which is on 175%. Another key measure is the deficit as a percentage of GDP, but in this instance Greece outshines the UK with its deficit to GDP coming in at less than 1% whereas the UK is 5%, one of the worse percentages in the whole of the EU.
The second comparison we can draw is that their fragile banking sector is not all that dissimilar to ours in that they are hugely dependent on the ECB to provide them with funding, without which they wouldn't be able to exist and if it wasn't for the ECB, runs on their banks would have occurred some time ago. There's still a chance of this happening if negotiations lead to a higher chance of Greece leaving the EU, but for now that looks highly unlikely, so Greek depositors needn't prepare their mattresses to stuff with all their euros just yet. The UK of course has two of its biggest banks still under (partial) taxpayer ownership.
So what are the lessons that we can learn from Greece? The first is that we need to address this continuing spiral into debt. Owing over £1.5 trillion to our creditors is not a strong position to be in (even if one of the UK's largest creditors is the Bank of England) and a daunting prospect for generations to come that will have to continue to pay this debt down. One comparison we cannot draw is that we are not in a position to be able to write off large chunks of our debt like Greece has. Our economy is growing and the deficit is falling, but if we remain on track a meagre surplus will not be achieved until at least 2018. We would have to run this surplus for many years to make an impactful dent in our debt mountain. Increases to borrowing would mean we haven't learnt anything from the crisis of the last six years, so if there's anything we can learn here it is not to be drawn into borrowing more.
Some of the positive noises to have come out of Greece since the election are that they plan to crack down on tax avoidance and reduce bureaucracy. We've heard this all before and the current UK administration claims to be doing the same and these are good measures to be taking. If Greece ups its game in these areas the UK should sit up and take note.
The final lesson the UK could learn is that a major protest vote on the scale we've seen in Greece is not the answer to our problems. By voting in the far-left Syriza party Greece has opened itself to the possibility of becoming politically alienated, especially if the governing administration takes a hard line in negotiations with the EU. There is the chance that Greece could exit the eurozone, which would have huge implications for all of us and it would make last year's prospect of an independent Scotland pale into insignificance.Suggest a correction