The UK’s banks were at least as badly damaged as Ireland’s in the financial crisis. But the UK had its own currency and a functioning central bank. The currency acted as a shock absorber, falling in value as the central bank cut interest rates to historic lows and used extraordinary measures to reflate the economy in the aftermath of the crisis. The UK’s economy still suffered – it has had a very long, slow recovery. But had it been a Euro member, the damage would have been far, far worse. It would have gone down the same road as Ireland
.. But Cyprus is actually doing considerably better than the IMF’s prediction of 8% gdp contraction, and far better than Ireland, Greece, Portugal or Spain. This is no doubt because it forced bank creditors to take losses and used capital controls to protect its economy from damaging capital flight.
.. But Iceland’s government had a big advantage over Ireland and Cyprus. It had its own currency and full control of monetary and fiscal policy. It could protect its economy. It allowed its banks to fail and refused to honor foreign liabilities: there was legal action against it, of course,but it won. It allowed its currencyto devalue by 50% and imposed capital controls, most of which are still in place. And it provided fiscal support to businesses and households. Six years later, Iceland’s economy has recovered fully from its crisis and is expected to grow at a rate of 2.5% over the next year.
George Osborne, UK chancellor who grew up and became an idealist
Either way, Mr Osborne’s mutation is the story of this government. David Cameron has not changed since becoming prime minister five years ago. If their partnership were dramatised in film, the chancellor’s role would demand the better actor: he alone goes through a narrative arc.
If Europe Cannot Bend, It Will Break
When Mr Tsipras claimed that he had a democratic mandate to demand change in Europe, Wolfgang Schäuble, the German finance minister, is said to have responded: “I have also been elected.”
.. Elsewhere, the sight of a radical left party such as Syriza or Eurosceptic conservatives, such as Britain’s Tories, extracting concessions from the rest of Europe could boost similar parties across the continent, making the EU even harder to manage.
As a result key governments in Europe, in particular Germany, are more willing to contemplate Grexit and Brexit than the Greeks and British may have realised.
Politics trumps economics as George Osborne outlaws borrowing
And the restriction could hurt growth because borrowing to invest in roads and schools at rock-bottom interest rates could boost the economy. But Mr Osborne, the arch-tactician, knows that the promised vote in Parliament on the plan will make Labour MPs squirm.