Sep 2011 08

Greek bond yields show their spending cuts weren’t deep and fast enough4

Financial markets have recently lost much of the little faith they had in the Greek government’s ability to repay its debt. A bond promises to pay the bearer a fixed sum on a fixed date. One year bonds are those where the due date is one year on from now. Yields on these have rocketed to 96 per cent on Greece’s one-year government bonds, meaning investors are only prepared to pay just over half the value of the promised payment due in a year’s time.

The Greek government simply cannot borrow money at a sensible rate, because it has borrowed too much for too long and its public spending cuts are too slow and too shallow. The Treasury’s Budget 2011 forecasts predicted that the government would pay almost £50 billion on debt interest this year. British bond yields are less than one per cent. Britain’s economic position is much more stable than Greece’s, but the Greek experience does show what happens when governments which spend too much money fail to cut public spending deep and fast enough.

Take a look at our Real National Debt paper and watch the video below to find out more about how much debt the Government really owes.

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  • Anonymous

    We must get out of the EU. We cannot afford to keep bailing out other countries.
    The Magna Carta states that we should not be ruled by any other country, not even Europe.

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  • Colinlaverick

     Yes out of the EC but we need in place a safety net to avoid trade barrier retribution by our ” friends” on the continent. We need the option to join with the US trade association – which includes Mexico so, with the best will in the world, we can’t have  immigration from any other member state. 

    Look at Spain, we subsidise them and in return they use the money to subsidise the income tax of footballs whose earnings over £10 million pa are not taxed. Ronaldo is said to receive £7 million pa of untaxed income, thanks to the net contributors to EC funding. At least he was, according to a national paper, a year or so ago. Probably still is?

    The latin EC members don’t pay tax as those in NW Europe do so their GDPs are perceived by the the EC to be lower than they actually and as a result,  yes, the latin countries receive higher subsidies than warranted, at NW Europe’s expence.  

  • Sick of the South

    Given the fact that Greece also appears to be on the verge of revolution, or at least serious civil unrest, it also shows what happens when governments impose savage spending cuts in order to pay off the debts incurred by a few very wealthy and very greedy individuals.