UK credit-rating threat rattles politicians – MoneyWeek

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ChancellorGeorgeOsborneinsistedthat,onthecontrary,itdemonstratedtheimportanceofstickingtohisguns。

“Idon’tseethisfalsechoicebetweengrowthanddealingwithyourdebts。

Ifyoudon’tdealwithyourdebts,thenyouwilldefinitelynothavegrowth。



Politicallyitwas“possibletoreadtheMoody’smissiveeitherway”,saysJeremyWarnerinTheDailyTelegraph。

OneofthemainthreatstoBritain’sAAAratingwasidentifiedbyMoody’sasslowgrowth,whichappearstosupporttheopposition’smessagethatthecoalitionis“cuttingtoofartoofast”。

Yettheotheristhat“economicstagnationmaycausethegovernmenttoloseitsresolveandgoslowondeficitreduction”。

However,fromaneconomicpointofview,muchofwhatMoody’sissayingis“blindinglyobvious”。

Itdoesn’ttakeageniustorealisethatifeveryoneistighteningtheirbelts,demandis“likelytotakesomethingofahit”。

Osbornewouldbewell-advisedtoconcentrateonfindingsomegrowth。

Thisdoesn’tmeanheshouldsurrender“toLabour’scallsforaPlanB”(asTheGuardianpointsout,Osbornethinksthecountry“smellsarat”whenithearsBallstalkingaboutborrowingmoretogetontopofthedebt),butdeliversome“radicalsupply-sidereform”,including“investment-friendlytaxbreaks,andwork-incentivisingtaxcuts”。

It’snotthatsimple,saysLarryElliottinTheGuardian。

Osborne’sfearisthata“modestgiveawaybudgetwouldbetheworstofallpossibleworlds”:notbigenoughtoboostgrowthbutbigenoughtoscarethemarkets,causinginterestratestoriseandnegatingany“impactoftaxcutsandspendingincreases”?

ThetruthisthatOsborneandBallsseem“equallybaffledbyevents”and“politicalgrandstanding”won’thelp,saysSimonJenkins,alsoinTheGuardian。

Thereisaconflictbetweenausterityandgrowth。

Clearlyit“makesnosensetodriveaneconomyintorecessionwhereitstopspeoplefromworkingandthuspayingmoretaxes”。

Indeed,thefailureofthefinancialeliteto“thinkoutofitsbox”andstimulatedemandisruiningthelivesofcitizensacrossEurope。

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