I'm pleased for Greece because they've shown the world community that they can repay their debts at some time in the future. They didn't know which area of the economy would give them an advantage. They do now - its the tourism industry. Obviously, Greece needs a broader contribution i.e. across all sectors of the economy. But they can build on this one.
Back home (UK), the Treasury has identified the 4 horsemen of the apocalypse:
- Household debt
- Commercial debt
- National debt
- Balance of Payments deficit
I've already given a possible solution to the above. The 4th item was caused by lower productivity which led to poorer exports which led the UK losing market share of the global economy and was made worse by increasing imports. The solution to the 4th item is obvious - take a leaf from Greece's book. Not that British tourism is going to ignite the economy; it's the fact that turning a current account surplus is possible no matter how indebted you are.
As for the other 3, they can only be alleviated by sustained strong economic growth and the proceeds of this growth need to be evenly distributed. Already some members of the press are saying that wage rises will grow faster than inflation. I should think so if industry and the people are going to pay down their debts. Wages have been declining in real terms for around 5 years; they need to grow above inflation for the next 5 years. However, we're talking about sustained growth; we can't afford to fuel another bubble i.e. industry and the people must pay down a substantial amount of their debts to manageable levels. The paying down of debts, including the National Debt, will take the heat off the economy so there will be little cause for concern over inflation - except maybe for external factors.
Next month is budget month. Until then...
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