UK on Brussels' watchlist for "Macroeconomic Imbalance"

#1
European Commission: Macroeconomic Imbalance Procedure

THE UNITED KINGDOM is experiencing macroeconomic imbalances, which deserve monitoring and policy action. In particular, macroeconomic developments in the areas of household debt, linked to the high levels of mortgage debt and the characteristics of the housing market, as well as unfavourable developments in external competitiveness, especially as regards goods exports and weak productivity growth, continue to deserve attention.

More specifically, the UK faces tensions between the needs for deleveraging, maintaining financial stability and avoiding compromising investment and growth. The primary cause of the growth in household debt was high and volatile house prices, linked to an insufficient and rigid supply of housing. Household deleveraging continued in 2012 and house prices
corrected further but this may not be sustained once the economy improves and housing transactions return to more normal levels. Policy measures have been introduced aiming at increasing residential construction, although it is not yet clear whether they will prove effective. As a consequence of a combination of high house prices and the widespread and growing use of variable-rate mortgages, households are particularly exposed to interest rate changes. The stock of UK corporate debt is modestly high yet some firms are having difficulty accessing adequate funding for investment. The UK is also confronted with the twin challenge of sustaining the pre-crisis dynamism in service exports and boosting the underlying drivers of productivity in the industrial sectors in order to regain the external competitiveness that was partly eroded in the pre-crisis years. The net trade outturn for 2012 was lower than expected. Overall public investment remains low and it is not clear when and to what extent private investment will pick-up. On current policies, the flow of credit may only be normalised once broader macroeconomic conditions improve. Skill gaps persist and closing them will require a substantial long-term investment. Given the size of the British economy, the imbalances may generate spill-overs to the other European economies.

Full report: http://ec.europa.eu/economy_finance...nal_paper/2013/pdf/com(2013)_199_final_en.pdf
 
#3
Fine as it goes but it doesn't say that the biggest single factor in the problem was the debt binge Brown went on for 10 years. Strip his stupidity out of the equation and UK PLC would be in far better shape.

Strip out the £10 billion net payments we make to the EU as well and our debt would come down still faster...

Wordsmith

shouldnt Brussels be more worried about the euro crisis? Incidentally, with out own government looking at all of this. The OECD, the IMF etc. should we not be raising the cost saving of shutting that office down and save not only the british taxpayer, but other European taxpayers some cash?

So tell me if I'm wrong on this, but i thought we we're in the shit because people are not spending their cash preferring to pay down debts.


however a quick flick through indicates that all nations seem to have the problem. Incidentally the phrase 'needs monitoring' normally equates to 'we'd like a bigger budget please to empire build.'
 

Wordsmith

LE
Book Reviewer
#4
shouldnt Brussels be more worried about the euro crisis? ...however a quick flick through indicates that all nations seem to have the problem. Incidentally the phrase 'needs monitoring' normally equates to 'we'd like a bigger budget please to empire build.'
The EU has an excessive debt procedure.

EU Excessive deficit procedure - European Commission

In order for EMU to function smoothly, Member States must avoid excessive budgetary deficits. Under the provisions of the Stability and Growth Pact, they agree to respect two criteria: a deficit-to-GDP ratio of 3% and a debt-to-GDP ratio of 60%
If the EU had been more vocal about countries breaking those limits in the first place, most countries would not be as deep in the shit as they now are.

Here's the interesting bit.

When the Council decides that a deficit is excessive, it makes recommendations to the Member State concerned and establishes deadlines for effective corrective action to be taken.

The Council monitors implementation of its recommendations and abrogates the EDP decision when the excessive deficit is corrected.

If the Member State fails to comply, the Council can decide to move to the next step of the EDP, the ultimate possibility being to impose financial sanctions.
So the EU has the legal power to impose financial sanctions on countries with excessive deficits (Slovenia and Spain among others). It'll be interesting to see what happens if it tries to impose sanctions on Spain - which is big enough to tell the EU to go form and multiply if it chooses to do so.

And here's another interesting link. The EU has been telling Greece it's been running an excessive deficit since 2004.

Excessive Deficit Procedure - Greece - European Commission

Article Name EDP step  Date
104(3) Commission report 19.05.2004
104(5) Commission opinion on the existence of an excessive deficit 24.06.2004
104(6) Commission recommendation for a Council decision on the existence of an excessive deficit 24.06.2004
104(7) Commission recommendation for a Council recommendation to end the excessive deficit situation 24.06.2004
Greece joined in 2001. So 4 years before the Lehman crisis, Greece was being flagged up as having excessive deficits.

There's none so blind as won't see.

Wordsmith
 
#6
Who's going to break it to Wordsmith that this is about Household (Private) debt and not Government debt or the deficit?

Or at least explain the difference.
 
#7
Fine as it goes but it doesn't say that the biggest single factor in the problem was the debt binge Brown went on for 10 years. Strip his stupidity out of the equation and UK PLC would be in far better shape.

Strip out the £10 billion net payments we make to the EU as well and our debt would come down still faster...

Wordsmith
Given the number of targets closer to home the European Commission could have chose but they pretty much nailed the flaws of the UK PLC's debt dependency culture. It has become a moral cancer running through the whole way the place works, well shirks and puts its consumer baubles on the credit card, and even thinks.

There's a simple reason for not highlighting the deficit: Osborne is already obsessing on it and like the one in the US it is properly seen as a secondary symptomatic problem as far more urgent problems present themselves and multiply. Having the UK bumping along in a multi-dip recession for what could be a decade, or worse tilting into full on depression is immediate and has the potential to greatly deepen the hole Brown left in public books after his mainly post Lehman spending binge. That the alram bells are not ringing in No 11 at this point is putting the countries credit line and longterm future at risk.

At this stage this is pretty obvious, simply blaming the Brown-Blair nexus and their rosy eyed Thatcherism-lite or even more desperately the EU is looking very lame.

It's not just the carping bureaucrats of Brussels, the supposedly like minded Septic policy elite are increasingly perplexed by the wrongheadedness of the EU's richer countries including the UK in it's fit of penny wise piety though they rightly see Germany as the leading proponent of dummkopf economics.
 
#8
Given the number of targets closer to home the European Commission could have chose but they pretty much nailed the flaws of the UK PLC's debt dependency culture. It has become a moral cancer running through the whole way the place works, well shirks and puts its consumer baubles on the credit card, and even thinks.

There's a simple reason for not highlighting the deficit: Osborne is already obsessing on it and like the one in the US it is properly seen as a secondary symptomatic problem as far more urgent problems present themselves and multiply. Having the UK bumping along in a multi-dip recession for what could be a decade, or worse tilting into full on depression is immediate and has the potential to greatly deepen the hole Brown left in public books after his mainly post Lehman spending binge. That the alram bells are not ringing in No 11 at this point is putting the countries credit line and longterm future at risk.

At this stage this is pretty obvious, simply blaming the Brown-Blair nexus and their rosy eyed Thatcherism-lite or even more desperately the EU is looking very lame.

It's not just the carping bureaucrats of Brussels, the supposedly like minded Septic policy elite are increasingly perplexed by the wrongheadedness of the EU's richer countries including the UK in it's fit of penny wise piety though they rightly see Germany as the leading proponent of dummkopf economics.
You seem to suggest that a large Keynesian inducement is required.

I disagree.

I would argue that the UK economy (and those of much of the 'western' world) are not in depression but merely taking a downward adjustment to an equilibrium position after years are 'induced' inbalance and disequilibrium. Perpetuating disequilibrium will not work. Current gloom and doom is the very proof of that.

It's not a case of the UK not spending enough, it's a case of it not spending it correctly. Simply adding to the debt mountain may bleep the growth data upwards in the short term, but then what? Just look at Brown's post-Lehman 'miracle' stimulus that simply created a utterly false dawn.
 

Wordsmith

LE
Book Reviewer
#9
Who's going to break it to Wordsmith that this is about Household (Private) debt and not Government debt or the deficit?

Or at least explain the difference.
http://ec.europa.eu/economy_finance...nal_paper/2013/pdf/com(2013)_199_final_en.pdf

What part of:

In particular, the need to bring unsustainable levels of public and private debt under control and to get a better
balance between income and expenditure is temporarily dampening economic activity and employment.

...structural reforms take time to support growth and job creation, which in turn would reduce pressures on public finances.
can't you understand? (my bold)

(Page 2 and 3 of the EU's own document).

Wordsmith
 
#10
http://ec.europa.eu/economy_finance...nal_paper/2013/pdf/com(2013)_199_final_en.pdf

What part of:



can't you understand? (my bold)

(Page 2 and 3 of the EU's own document).

Wordsmith
Both your examples are a comments generally on the state of EU members - not necessarily the UK.

Lack of understanding back in your court.

Public debt is not mentionned in the section on the UK - which, I presume, is why you cherry-picked some quotes from elsewhere...

Unless of course, you're now assuming the public debt problems in other EU member states is a result of the Brown spending binge you grandstand above. Again, somewhat contradictory to your underlying belief that Brussels is the root of all evil.
 

Latest Threads

Top