AVOIDING A GREEK TRAGEDY
Budget 2010's impact on the economy is as follows: It sends a clear signal to the rest of the world that we can control our public spending and that means avoiding what has happened to Greece and Britain. In those countries a weak approach to stopping the budgetary slide - focussing on taxing a very small group of income earners - is failing to halt the relentless rise in government borrowing. As a result Greece's debt repayments are becoming increasingly difficult for its government to afford: yields on two-year Greek bonds have risen 1.3 per cent, a sign that bond markets fear that Greece's public finances will soon be out of control. The downgrading of Greece's bonds is a fate that could also soon await Britain after financial markets reacted negatively to Alastair Darling's failure to contain state spending. Analysts say state spending in the UK needs to fall by one-fifth. Darling's budget goes nowhere near achieving this. After two failed attempts to correct the budget by raising taxes, Ireland's latest budget has finally grasped the nettle of controlling public spending in a way that other finance Ministers envy. Provided the government's sticks to its course, our public finances will have been pulled back from the brink.
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