UK could face Greece-style debt crisis

A Greece-style debt crisis is looming in the UK, which has a public debt running at 60 percent of its 2009 GDP. Its government debt rating could face a downgrade if economic conditions worsen and government spending spins out of control. Will the UK become the next Greece?

A similar currency depreciation...In the first three months of 2010, the pound lost 8 percent of its value compared to the US dollar.

Analysts say one reason is the loosened monetary policy by the British central bank, which is expected to push the government deficit to 12.8 percent of GDP output in 2010. This is very reminiscent of the Greek crisis, which was triggered in part by the failure of the previous government to come clean about the problem.

A Greece-style debt crisis is looming in the UK, which has a public debt  running at 60 percent of its 2009 GDP.

The impending general election in the UK also brings about uncertainties as the two parties bicker over the intensity of debt reduction moves.

Prof. Philip Booth, Director, UK Institute of Economic Affairs, said, "If the new government fails to resolutely cut government deficit...the market will worry whether UK will be the next Greece."

However some economists say there is no serious suggestion that the UK will default on its debt repayment, as its economy is much bigger than the Greek economy. This has given the UK government more space to deal with the problem.

Charles Grant, Director, Center For European Reform, said, "The economic fundamentals are solid..."

They also believe the depreciation of the pound will to some extent ease the trade deficit of the UK. But as a large government deficit and reliance on finance will hurt future economic recovery, cutting the government deficit must be a top priority.