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Due to massive borrowing following the banking crisis, Britain’s debt is causing concern for the European Commission.
A European Commission report that had been leaked to Reuters and excerpted in The Telegraph said Britain’s plan for reducing its debt is insufficient.
“The overall conclusion is that the fiscal strategy in the convergence programme is not sufficiently ambitious and needs to be significantly reinforced,” the report said, further stating, “A credible time-frame for restoring public finances to a sustainable position requires additional fiscal tightening measures beyond those currently planned.”
According to The New York Times, “The pound fell to $1.4954 [in early March], its lowest level against the dollar in nearly 10 months. The yield on 10-year government bonds, known as gilts, slid as investors fretted that Parliament would be too fragmented after a crucial election in May to whip Britain’s messy finances back into shape…Without a strong political majority to tackle Britain’s lumbering fiscal problems, investors could start to make it greatly more expensive for the government to raise funds, setting the stage for a potential double-dip recession, if not worse.”
British Treasury Chief Secretary Liam Byrne told BBC Radio that he believes the European Union “got the judgment wrong.”
“We think the plan that they’ve set out would require us to take something like £20 billion more out of the economy by 2014-15 and we think that would do irreparable damage to public services or to taxpayers” (Reuters).
Britain currently holds the second-largest level of public and private debt owed to non-residents of all countries worldwide.