Likening U.K. to Greece `Ridiculous,' British Official Says
Comparing Britain’s fiscal and economic position to that of Greece is “frankly ridiculous,” U.K. Business Secretary Peter Mandelson said.
“The real difference is that we have an AAA rating, Greece has junk status,” Mandelson told a news conference organized by his Labour Party in London today. “Britain is not Greece. We are very, very different economies.”
Concern the Greek debt crisis is spreading intensified today after a cut in the nation’s rating to junk drove up borrowing costs from Italy to Portugal and Ireland. Conservative leader David Cameron says his first priority if he wins the May 6 election will be to reduce Britain’s budget deficit, the biggest in the Group of Seven leading industrialized nations, to avoid a similar crisis.
“Greece stands as a warning to what happens if you don’t pay back your debt,” Cameron said at an event in Morley, northern England today. While Britain was “different” from Greece, “this year we are borrowing more than the Greeks are,” he said.
“This is no time for lurches in policy, no time for inexperienced hands,” Mandelson said. Labour, led by Prime Minister Gordon Brown, says it is too soon to cut spending.
‘Bailing Out Greece’
“Thank God we’re not in the euro,” Conservative Treasury spokesman George Osborne said in a speech to the Institute of Directors in London. “Our boom would have been bigger, our bust would have been deeper and we would now be bailing out Greece.”
Standard & Poor’s, which yesterday reduced Greece to below investment grade to BB+ from BBB+, kept its negative outlook on the U.K.’s AAA rating on March 29, citing the “absence of a strong fiscal consolidation plan.” The ratings company also cut its long-term local- and foreign-currency sovereign rating for Portugal to A- from A+ yesterday and said the outlook was “negative.”
Mandelson rejected calls to speed up budget cuts and announce them in more detail, saying withdrawing stimulus now would damage the U.K.’s economic recovery.
“What’s happening in Greece and possibly Portugal points to the fragility of the economic situation, which is why amongst other reasons we believe it would be wrong in our own country to take risks with the recovery,” he said. “If Europe is adversely affected, then our economic prospects, our growth will be affected too. The time for the spending review is not now, it is later this year.”
Mandelson’s comments echoed those by Foreign Secretary David Miliband, who told BBC Radio 4’s Today program that Conservative warnings that Britain faces similar risks to Greece are “economic illiteracy.” Miliband said U.K. debt is about half that of Greece, at 56 percent of GDP, and has a longer maturity.
Osborne said a Conservative government would hold an emergency budget within 50 days of the election. “It will be about showing the world that Britain can live within its means,” he said.
To contact the reporter on this story: Svenja O’Donnell in London at email@example.com.