Are Europe's leaders risking another recession by cutting too soon?

Who is the more credible ...the guy who recognises that he need to pay his way or the spendthrift who grabs yet another credit card to pay off the excesses on his previous batch? Demand from most developed world countries is shot for the forseeable future and we need to look elsewhere for a demand led recovery. This is not the 1930's ...

I fear for the UK. You have to look at the quality of those who are governing us. Gordon Brown was Chancellor and then Prime Minister, and today we are paying for the excesses that happened within his 13 years. If Brown, as Prime Minister -unelected as maybe-, failed to see how his policies had panned out and failed to put in place restraint on the growing debt mountain that was there in front of him, then he should be held accountable for those actions. By being accountable for those actions I don't mean losing the election, I mean kicked out of politics and never again able to inflict such damage, heartache and penury that his policies and party have left us with, while someone else (unknown and untried) has been left to pick up the pieces.

The latest mistake was having the previous fiscal stimulus at all. This has just created a greater debt pile and created a much bigger problem going forwards. In reality by removing the stimulus they are acknowledging this fact buy their own actions. Now that the debt growth rate is so high, it is very questionable as to whether the cuts will in fact be enough to solve the problem? Certainly the time scales are too optimistic. It stands to reason that if all countries are cutting back then economic growth most suffer across the board. Hell I'm not an economist, but if I can see this why can't they? It is not a double dip, it is the continuation of the Great Depression II. There has been no real recovery and things are clearly getting more shaky by the day. My advice would be stay in cash, short term. Gold and Silver look like they are pulling back in price and may face a large but temporary fall. That would be a good entry point. Market hits bottom in March of the new year? From there it is anyone's guess?

Thank god for Bond vigilantes. Without the governments of this world having to worry about them we would have hyperinflation similar to Germany and Zimbabwe within 5 to 10 years.

I'd also like to see those evading paying tax fined to the exent of the cost. I'd like to see the malingerers forced to find work and pay their way. I'd also like to see those who have paid their way given a break from having to struggle to keep up with the overburden of financing the country and I would also like to see a Government for once showing their promises kept after coming into power.

I worry about the notoriously difficult to accurately predict statistic that is UK GDP growth. If the OBR is being optimistic in predicting 2.3% growth for next year, and most believe they are, exactly where is Osborne going to cut next to fill the hole? If growth turns out to be e.g. 1.3% he'll have to find approx £15bn, or £60bn over the life of the Parliament. Does he have a plan B if growth is not as predicted? Sadly the current debate seems full of playground politics and the blame game (usually in the wrong direction) as opposed to contingency plans for slower growth, particularly in the light of so many major European economies choosing to cut at once.

Plainly the cuts are excessive and much too early. We will have a 1930's style slump, mass unemployment, malnutrition, homelessness, rotting infrastructure and a rise in support for fascist politics. Let us hope sanity returns before we have a Third World War.

If everyone is making cuts where will the growth come from? It would be very easy to slip back into 1930's beggar your neighbour policies which benefit no-one. This is a tricky one to call. It appears that getting a grip on GDP is as easy as nailing jelly to the wall. Herein lies the problem. With such low figures and regular restatements who can tell whether the economy is growing or shrinking? If I were to come down on one side or the other I would probably (only probably) opt not to make cuts yet, if only to avoid the prospect of a downward spiral into depression. But who knows?

Jeremy Bosk, I believe you may be right.

Tont

Jeremy Bosk, you have just supplied the proof that you do nt have to write a long screed to establish some common sense.

Thank you

Hate to bust a growing consensus, but, Jeremy Bosk, you must be joking.

Roosevelt's New Deal prolonged the Depression and Keynes and his accolytes like JK Gabraith aided and abetted it. No matter what short term benefits accrue from intervention, someone eventually has to pay. When even the ungovernbale French state is reducing the working and retirement conditions of the Fonctionnairiat, it is plain that the current cuts are only the beginning. Of course there is an argument, and I agree with it, that it is better to keep someone in work, paying tax, than not in work and consuming benefit. But, not if the 'work' has no value. The public sector creates wealth only indirectly, by consuming private sector goods and services. Many of the soi-disant 'services' are merely sinecures for a new lower middle class with a vested interest in not doing what their 'service' is set up to do. What do the Regional Development Agencies do when they have developed their Region to the point where their support is no longer necessary, for example? Edward Du Cann once spoke of the 'inevitability of gradualism' and that's the disease of most public sector employment. The UK public sector has simply become a Salariat, a client group for left consensus governments from the 60s onwards. Even Thatcher's governments gradually fell unto line. Not, of course, that untramelled capitalism is any better. The two came into perfect alignment when Brown's tripartite financial regulatory system came up against the duplicitousness of a financial srvices sector that could dream up derivatives that could pay the vendor handsomely when the value of the junk they were selling went down. Credit default swaps? Genius.

To get back to Jeremy's response, it is not plain that the cuts are excessive and too early. We already have malnutrition, homelessness and rotting infrastructure, but it's not because people or the State is poorer. It may be because successive governments have allowed the health/education/welfare axis to dominate everything else, at the expense of everything else. And as for the Fascism? Well, one benefit of a supine underclass is that it doesn't care...yet.

If

Wait until when? and meanwhile the debts will balloon and become even less affordable.It is going to be painful but as far as I am concerned the sooner., the better.Can the Greeks, the Spanish, the Irish afford to wait much longer?Can we? Blanchflower and the Americans talk a lot but are not able to tell us when they reckon the recovery will be strong enough for action to be taken.So we should go on borrowing until some countries go bankrupt and then what? Will it be then easier.?

Jeremy Bosk IS right.

15 years ago the Japanese economy was in a very precarious position. Off the back of a banking crisis the private sector was deleveraging heavily. After initial Government attempts at stimulus the spending axe was wielded in a similarly heavy handed fashion, and what Japan ended up with was a public sector deleveraging every bit as severe as it's private sector equivalent. The result? 15 years of debt deflation and five recessions!

No sane person would deny that our budget deficit is causing issues that need to be addressed and that, over time it has to be cut. However remember that UK debt is much more long dated - the average time for redemption of UK gilts is circa 12 years. Greece were in such a state because they had so much short dated debt which needed to be rolled over quickly. The UK is NOT Greece, and with careful management was never likely to become a Greek clone.

The main reason for such swingeing cuts is the usual Conservative ideological jerk off model. Sadly the wreckage in five years time will be there for all to see!