WARNINGS FROM BRITAIN – AT 10:34 A.M. ET: We're struggling with our own economy, but things in Europe are much worse, with Greece near collapse, and the European Union's economic scheme in severe jeopardy. Now a major British economic figure warns that Britain's economy may never recover if the economic convulsions of Europe get worse. The implications for the United States could be considerable. From The Telegraph:
Britain's economy may suffer “permanent” damage and “never quite get back up” if the euro collapses in a chaotic way, the Government’s chief economic forecaster has said.
Robert Chote, the head of the Office of Budget Responsibility, issued the warning amid fears of financial shockwaves across Europe if Greece crashes out of the single currency.
The senior Government economist, who has access to the most up-to-date Treasury data, said this could cause a recession as bad as the last one and “lingering, long-lasting effects” for Britain’s public finances.
He said it could “permanently hamper the economy” in the worst case scenario, raising the prospect that Britain may never again see the same high growth it has had in recent decades.
Mr Chote’s comments come as:
* A row broke out over whether Angela Merkel, the German leader, has suggested Greece should hold a referendum on leaving the euro.
Greek officials said she raised the idea in a phone call with their President, but a spokesman for the German Chancellor strongly dismissed the reports.
* European Union officials finally admitted they were drafting plans for how Greece could exit the single currency.
* George Osborne, the Chancellor, warned that the “storms” of a eurozone crisis are gathering again. He said there is a risk that Europe’s “good work in building a stable financial sector and creating jobs and prosperity might unwind”.
COMMENT: We should follow economic events in Europe closely. Their impact is as much psychological as monetary. If Europe starts to slide into financial chaos, many "investors" in the U.S. will start to panic, pull their money out, and precipitate another economic crisis here.
Ordinarily, the West would look to American leadership at a time like this. I don't see too many nations looking our way. They may have finally learned that we can do a lot better than a community organizer in the White House.
May 19, 2012