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Wednesday, 25 April 2012

Humous and Taramasalata = UK Double Dip?


Wall Street 24 / 7 -

UK Falls into Double Dip Recession and Austerity Gets Another Test
Posted: April 25, 2012 at 5:06 am
The UK Office of National Statistics announced today that first-quarter 2012 GDP dropped by 0.2%. That is not much, but it comes on the back of a drop in the final quarter of last year. That means, based on traditional definitions, the United Kingdom has joined much of Europe in a new economic downturn.

The effects of the news may be largely psychological. The 0.2% figures could be revised back to a flat line or even a slight
 gain next month. But the news from the eurozone is that Spain already has fallen into another substantial contraction. Italy’s leader, Mario Monti, said his country also has dropped into recession with contractions in the third and fourth quarter of 2011 and a likely continuation of the trend this year. There is hardly a reason to mention Portugal or Greece.

It would be absurd to say that the UK needs any kind of bailout, as much as it would be to say France needs one. But the trouble in England makes it a less robust trading partner, which will cascade to some extent into Europe.
The UK also will be another testing ground for the austerity vs. stimulus battle. Chancellor of the Exchequer George Osborne’s austerity plans are meant to cut expenses of £123 billion by 2016-17. As the WallStreet Journal pointed out recently

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