July 25, 2012
The economic crisis that is sweeping Europe is starting to hit Britain really hard. Over the last couple of years economists have been warning that we can’t let the “contagion” spread from troubled nations such as Greece and Portugal to the rest of Europe. Well, it is too late for that now. Spain and Italy are coming apart at the seams at this point, and even “stronger” nations such as the UK and France appear to be deeply troubled. According to numbers that were released just this week, the UK economy has now contracted for three quarters in a row. During the second quarter of 2012, the UK economy shrunk by 0.7 percent. That was a much larger contraction than the 0.2 percent contraction that economists were forecasting. At this point we have got a definite trend going. During the fourth quarter of 2011, the UK economy shrunk by 0.4 percent. During the first quarter of 2012, the UK economy shrunk by 0.3 percent. And now in this latest quarter the contraction of the UK economy appears to be accelerating. This economic downturn in the UK is being called “the longest double-dip recession for more than 50 years“. So will Britain soon look like Greece and Spain and Italy or will it be able to pull out of this nosedive in time?
The UK construction sector was hit particularly hard during the second quarter. It contracted by 5.2 percent, which was the biggest decline since the first quarter of 2009. Consumer confidence has reached a historic low in Britain and economic gloom is seemingly everywhere.
So what does the future hold for Britain?
Unfortunately, things do not look promising at all right now.
At this point, the budget deficit of the UK government is still about 8 percent of GDP, and British politicians are promising to reduce that significantly.
That means that more austerity measures are coming for Britain and less government money will be flowing into the economy.
So the economic slowdown is very likely to get even worse.
But of course we have been seeing the same kind of thing happening all over Europe.
Economists are warning once again that Greece is on the verge of declaring bankruptcy.
On Tuesday, the Telegraph ran a story with the following startling headline: “Debt crisis: Greece to run out of money by August 20“.
Haven’t we heard this before?
Yes, we have.
And every time, European leaders have gotten together and “fixed” the problem.
But of course they didn’t really fix anything. They just kicked the can down the road a little while and things just kept getting worse.