Skip to main content

UK BREAKING DEBT RULE 2012


To: The Right Honourable British Chancellor George Gideon Oliver Osborne MP.

From: Athinarayanan Sanjeevraja

Date: September 28, 2012

RE: Breaking Debt Rule

Suggestion: 

Good Morning Mr. Chancellor. Indeed, I was crushed to hear Bank of England Governor Dr. Mervyn King comments on breaking debt rule. Dr. Mervyn King gave permission to break one of your iron-cast promises. I am not faulting Dr. Mervyn King comments. Indeed, Dr. Mervyn King has done a pretty admirable job handling financial crisis in 2008.

Mr. Chancellor I am sorry to say that your government was elected to diminish the long term structural deficit. But your government failed to achieve it. UK keeps it top AAA credit rating because market expects that your government would keep the budget tight. But your government failed to keep the budget tight. If you lost AAA credit rating, interest rates will shoot up and UK will never be able to diminish its deficit. Indeed, UK GDP is shrinking. Therefore there will be less tax revenues to reduce fiscal deficit. But I don’t see any attempts by your government to diminish the fiscal deficit during 2012. UK adopted austerity plans in the past two years to limit government spending and keep borrowing rates very low but the UK economic recovery remains challenge due to weak global economy and banking troubles across major developed economies. Your government is not executing effective fiscal consolidation programme which should not restrain economic growth.

Mr. Chancellor, if I am not mistaken, UK real terms public expenditure is still increasing. You waste tens of billions on overseas aid and EU medical aid. If you could have cut it fraction, then you could have achieved your fiscal target. Private sector deleveraging leads to renewed economic growth. But deleveraging taking place in UK is very slow compare to United States and Australia. UK debt to GDP ratio is continuously rising. If I am not mistaken, UK the financial sector accounts for the largest share of debt and UK household debt is also increased since 2008. UK has to reduce the debt without overly restraining economic growth. It is not an impossible process. It is quite possible. Your government need to find the right balance between debt reductions and stimulate economic growth. I think your government should encourage more investment in nonfinancial businesses and restructure your banking sectors to enhance the private sector deleveraging. This would get back your economy on sustainable path.

Mr. Chancellor, your government had set up the Independent Commission on Banking (ICB) chaired by Sir John Vickers, to look at the reform of the banking industry to separate retail and investment banking functions. It was most controversial recommendation because the financial crises 2008 were a failure of regulators than regulation. Germany still continued on universal bank path despite severe banking crises. Mr. Chancellor, if you were failed to restructure banking sector, you cannot revive your economy Mr. Chancellor.

I am Athinarayanan Sanjeevraja with great respect of you Chancellor.


Comments

Popular posts from this blog

EU NEW FISCAL AUTHORITY FOR WEAK MEMBER STATES

This paper focuses on setting up new fiscal authority to manage compatible fiscal decentralisation and budgetary discipline in the EU Member States. The authority need to adopt a tough fiscal consolidation programme. The authority should be responsible for designing fiscal policy for all Member States with stricter rules, conscientious monitoring and enforcement mechanisms for the conduct of fiscal decentralisation and budgetary policy. If Member States does not implement or violate the fiscal authority law that Member State/States to be sued in the European Court of Justice. We cannot grow our economy without proper fiscal cooperation between Member States. So the fiscal authority must coach at least weak Member States how to implement effective fiscal policy so that crony driven economy can be turned into a competitive market based economy. EU established the provisions of the Stability and Growth Pact (SGP) to avoid excessive deficits of the Member States and take precise act

AN AMBITIOUS SUMMIT TOWARDS WORLD’S LARGEST FREE-TRADE DEAL WITH EU

Hon. American President Mr. Barack Obama, Mr. President, it is a great pleasure writing to you again on transatlantic relationship for European Union and the United States of America. America is Europe’s closest partner in Transatlantic Trade and Investment. It would be the most significant bilateral FTA. It does matter because it’s covering approximately 50 percent of global output, 30 percent of world merchandise trade and 20 percent of global FDI. Thus, both US and EU gains for fiscal consolidation and high employment as no additional spending or borrowing will be needed to achieve fiscal consolidation and high employment of the US and the EU. Indeed, cost reductions will benefit businesses and generate growth and employment in the US and the EU but reducing barriers to business would accord greatest economic benefits than tariffs as tariffs between the EU and US are already low. I hope that this press conference to commit to remove all duties on transatlantic trade and e

ECB's OMT PROGRAMME 2013

To: The Right Honourable Bundesbank President Dr. Jens Weidmann From: Athinarayanan Sanjeevraja Date: October 18, 2013 RE: ECB’s OMT Programme Suggestion: Good Morning Mr. President. Let me start by paying my respects to you and through you to. First up all, I would like to congratulate you carry out your duty best as a Bundesbank President. As a Bundesbank President you are correct, the causes of the euro crisis lie in the high level of indebtedness and the lack of competitiveness of some member states. Now, eurozone government spending is being reduced and reforms are being introduced across southern Europe but the European financial markets don’t seem to recognise this progress and are pushing up the interest rates on sovereign bonds to elevate. Mr. President, you argued that the OMT programme of the ECB is illegal due to the fact that it would make German tax payers liable for paying taxes to cover potential losses made by the ECB. In my opinion, Germ