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Is Caruana planning for financial meltdown?
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By David Eade
The Gibraltar Government admits the country is half a billion pounds in debt and of course we don’t know about what is hidden away. Many say, including the chief minister, that such a level of debt is manageable for the Gibraltar economy. Let us hope they are right. However I would like to beg the question – what plans have the government drawn up for financial meltdown in the UK and Europe?
Gibraltar has seemingly weather the worst of the economic storm that has hit the rest of the developed world although escaped entirely it has not running up record debt in the process. It is all well and good the chief minister and his government intending to sail a safe course but there is a hurricane off-shore and it is heading this way.
As I often have to remind Americans who write to me Gibraltar is not an island and if the chief minister believes it is in financial matters he could be in for a rude awakening.
It has been reported that Britain is drawing up contingency plans for what would be a catastrophic collapse of the euro. Many financial experts believe it could plunge the UK into a recession “beyond comprehension”.
The respected Swiss bank UBS has predicted a 20-25 per cent contraction in the GDP for strong countries and of 50 per cent for the weak. To pretend that a massive recession would not impact on Gibraltar is burying one’s head in the economic sands, sands more dangerous than those on Eastern beach. Andrew Lilico, chief economist at Europe Economics has been quoted talking of “a recession on a scale beyond modern experience or comprehension in a Western democracy.”
That scenario could become a reality if the euro collapses and the EU with it. Naturally the major EU nations and indeed the USA will fight to prevent that from happening but even the avowed euro supporter Lord Ashdown, when asked in an interview in The Spectator did he believe the euro would survive, answered emphatically: “No I don’t”.
The French banks are under extreme strain because of the possibility of a Greek default with its leading institutions, Societe General and Credit Agricole, both being downgraded by Moody’s. The entire banking sector is under threat worldwide and the crash could be on a wider scale than in 2008. We might shrug and say how does that affect us but if you just look at the names involved in our Financial Centre you will see many are the same. What hits Paris, London, Madrid and New York could strike at Gibraltar too.
Britain’s Chancellor of the Exchequer has remained silent for now but the Deputy Prime Minister Nick Clegg said in a recent speech: “The economic context is much worse than before” and the Shadow Chancellor has warned of a “massive economic catastrophe.”
If financial Agamemnon comes it will strike Britain and Spain very hard indeed – both of whom are vital for Gibraltar’s economic well being. Which brings me back to my question - what plans have the government drawn up for financial meltdown in the UK and Europe?
16-09-11
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