The UK may be entering a ‘triple dip’ recession. The official first quarter numbers, to be released tomorrow, could spell disaster for the government’s largely detested austerity program.
Although economists on average expect growth of 0.1 percent on the quarter, they warn it would take the smallest statistical variation to put the figure in negative territory. That would place the country in recession, typically defined as two consecutive quarters of economic contraction...
The government desperately wants a strong number to justify its increasingly criticized policy of painful spending cuts. But recent indicators on Britain's economy, the third-largest in the 27-country EU after Germany and France, have been disappointing.
Inflation is rising faster than wages, cutting into people's standard of living. Unemployment is up at 7.9 percent. Two international ratings agencies have downgraded the country's credit grade from the top level AAA, warning about the government's fiscal policies.
The government, which has long played on its AAA rating as a sign of its economic might, has been pursuing a harsh program of spending cuts and tax increases to reduce the budget deficit, which at 7.4 percent of annual economic output is more than twice the EU's 3 percent limit. Like many governments across Europe that have been scarred by the bond market turmoil that forced Greece and four other countries to need rescue loans, Britain is focusing on reducing debt quickly, even at the cost of short-term economic pain.
What some governments and economists are slowly realizing, however, is that they may have underestimated the damage such austerity would do.