ECONOMICS

Public Debt and Austerity in Britain

Public Debt and Austerity in Britain

Public Debt in UK

Britain is an island of course, populated by a lot of English, but it has not prevented international finance to dock, to the delight of the City, nor a George Soros to make some bold moves against sterling, much to the displeasure of PM's (Prime Ministers) (Hallet, 2004, pp. 152).

Currently, the UK government has a debt of just over 50% of the gross domestic product. Compared with a national debt of 78% of GDP at the Americans, that sounds really still human. But the rating agency S & P seems to see things differently: S & P had already warned last month already, UK could lose its AAA credit rating, making meanwhile worried about the future of the British national debt (Haywood, 2011, pp. 178).

Governmental Plans

S & P had calculated two years ago that are coming toward the British during the next few decades, enormous costs, because of pension liabilities in the public sector and the growing cost of social - and health care system. And now you also have the massive costs to the financial crisis (bank bailouts are not cheap, but let us note also the massive loss of tax revenue due to the crumbling prestige London's financial center is not!) (Janssen & Nolan, 1999, pp. 169). S & P is concerned in any case now that by 2050 the British government debt to accumulate to 200% of the gross domestic product. This would correspond to a debt which had to carry not more since the British II. But S & P is not alone with his worries!

Support - in terms of the concerns - the rating agency receives from a study by the respected British-North American Committee. Study shows the public sector pension liabilities at massive 85% of GDP (Guajardo & Leigh, 2011, pp. 313). The British-North American Committee warns strongly against the massive deficit, arising from the pension liabilities for employees in the public sector. Even now, according to the results of the study was, every Briton with 20,000 in debt due to the GBP. In other words, generations of Britons who are not even born yet, will have to pay off these debts (Kainz, 2010, pp. 125).

In reality, because the debt is largely denominated in British Sterling and the Euro is, that debt is more highly valued by non-resident investors, in contrast to what happens to the debts and German French example. Credit risk is related to any debt, there is the risk, and that a change in interest rates less obvious than that of the Euro. This has long been manageable due to significant capital resources local. In fact, the proportion of residents holding British debt is very high. Lower than in Japan (92%), it exceeds 70%, more than in Europe (Euro Zone) where the average is 47%. France is even the exact opposite of Britain, since residents there hold only about 40% of public debt (Keeley & Love, 2010, ...