The Eurozone continues to represent the most significant threat to our National Recovery and to the future viability of our public services. Despite another Summit and a new political dimension (as a result of recent elections), there seems little hope of the ECB and IMF plea for “immediate action” to stabilise the Eurozone.
Spain is the latest country to come into the “eye” of the economic “perfect storm” conditions hanging over Europe. With: a clearly unsustainable debt yield - attracting 10yr borrowing rates of 6.58% (well above the maximum 6% level considered to be sustainable); markets reacting badly; banks being nationalised; retail sales plummeting by a record 10%; and investors day by day increasingly withdrawing their funds from the country things are looking very bleak. Portugal, Italy, and Ireland are also either now in or perilously close to the “eye of the storm” themselves. Greece, meanwhile, battered and bewildered by the storm for several months and now facing new elections with anti-austerity campaigners heading some polls, face the real, some argue inevitable, prospect of exit from the great Euro project.
The latest proposal to avoid the disintegration of the Eurozone is the creation of Euro Bonds in which a significant part of the countries national debt would be centralised and tackled in a different way. Let us hope that it can be made to work. The problem with this proposal is that those countries that face the worst national debt levels will probably need to sign away a whole host of national interests as collateral. That could include national treasures, gold reserves and more. It is by no means certain that this latest initiative will work. It is anyone’s call as to whether the bond proposal will run – my assessment is that the price expected from individual Sovereign countries will be too much for them to take and a number, starting with Greece, will exit the Euro. This is as serious as it gets.
The consequences are dire and the UK is exposed. Some careful language is being used by our Government Ministers recently such as “clearing the decks to concentrate on the primary objective of protecting the UK from the storm conditions ahead”. Even if the Euro Bond initiative is implemented Greece exiting will affect our national recovery plans. That will mean far deeper cuts on our public expenditure.
Our public sector transformation effort will need to be ramped-up significantly and we will need to start to deploy far more radical solutions to those being deployed currently. In the event that the nightmare becomes reality we need decisive LEADERSHIP, real INNOVATION, UNITY, SELFLESSNESS, and a sense of PURPOSE and of SERVICE across the public sector. Everything is about to change and all the previous norms like employment terms and conditions will need to re-written in order for the Nation to cope with a new World order. Arguing over pension changes that impact us years from now and taking industrial action is the last thing people need to be worrying about. Very quickly…. they will need to start to turn their attention towards will they still have a job tomorrow!!
John Dew OBE