15/11/2013 - EU Warns Italy and Spain on Budget Deficit

EU Warns Italy and Spain on Budget DeficitEU Warns Italy and Spain on Budget Deficit.

Both Italy and Spain have received ‘slapped wrists’ from the European Commission over their coming financial budget for 2014.

We have already seen pressure applied to both Greece and Cyprus to ensure tighter budget controls and greater austerity spending cut measures, Italy and Spain and now in the firing line.

European wide rules now apply to most EU members to try and control budget deficits and debt. In the long term, this is designed to pull Europe from its precarious dent riddled position and offer financial stability to all.

Both France and Holland’s budgets were passed but Italy and Spain have been asked to revisit their budget spending for 2014 and introduce greater spending cuts and lower borrowing needs.

Comment

The shock wave here is that France only just made it and Italy/Spain are huge economies that totally dwarf that of Greece.

We have long said that the Eurozone’s problems have far from gone away and debt is still spiraling out of control. When you add the UK’s debt mountain to the pile, we believe worse is yet to come. Both the UK, Italy and Spain being the dominant Euro economies alongside Germany, are massively in debt.

Commentators are concerned with deflation, i.e. people simply not spending and this economies moving to free-fall much like Japan did for the last 20 years with any effort to pull out of recession being fruitless. Watch this space, but we see a rocky road ahead for both the UK and Europe.

We must cut spending on non-productive items such as welfare benefits whether we like it or not. We see the UK having to further attack the benefits system and to sharpen up our finances. We, alongside our European partners cannot simply keep borrowing simply just to meet interest payments on previous borrowing. People are being made to contribute, even the simple voluntary work required to enable people to receive benefits is a good thing for our debt position.

Taxes must rise, stock markets will tumble after this year’s initial rises and volatility will remain. We do not wish to see another 1930’s style market crash, bond crash and recession, but there is a huge risk of this is the next couple of years if spending is not cut. Watch out for our red investment alerts.

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