Britannia Radio

Finance News RSS ARCHIVE Print Page  |  Forward Page  |  E-mail Us

Bloomberg: Britain Currency to Crumble Tuesday, July 7, 2009 3:33 PM By: Elaine Barr Article Font Size   Harvard professor Niall Ferguson sees the handwriting on the wall with Britain’s currency, and he doesn’t like what he sees. “The probability of a real sterling crisis is around one in three, and the probability of major tax hikes and cuts in public spending is roughly one in one,” the British financial historian told Bloomberg Markets. The deterioration of the U.K.’s public finances already has prompted Standard & Poor’s to warn on May 21 that the country could lose its AAA rating. Another ominous sign: Chancellor of the Exchequer Alistair Darling said the government’s 2009 deficit would hit 12.4 percent of GDP. Nigel Lawson, former chancellor of the Exchequer under Margaret Thatcher from 1983 to 1989, agreed with Fergueson’s outlook. He said Britons can expect to face spending cuts in coming years in all areas, including Social Security and healthcare. “Our public finances are easily the worst we’ve ever had in peacetime. The amount of borrowing the government will have to do as a result of the deficit is very worrying,” Lawson said. Andrew Bosomworth of Pacific Investment Management Co. goes even further with his prediction. “In a worst-case scenario, there could be a run on the currency.” To head off a crisis, Lawson urged Britain’s next leaders to make deep cuts in government spending right away. Ferguson sees no alternative to severe cuts. “It has to happen. This kind of red ink implies both spending cuts and tax hikes that could make the 1980s look like a teddy bear’s picnic,” he said. © 2009 Newsmax. All rights reserved.