So, Brexit. And… Czexit, Pexit, Frexit as EU referendum CONTAGION sweeps Europe amid political quake.

 

Go to 5:38 and you will see I predicted this day exactly 3 months ago. The accuracy is uncanny…

I also called it in 2010 as well. Reference Lies, Damn Lies, and Sovereign Truths: Why the Euro is Destined to Collapse!, to wit:

What about the UK?

I’m glad you asked. We just finished our UK analysis (subscribers, see  UK Public Finances March 2010 2010-03-24 09:32:01 617.23 Kb), and the Greek theme has continued into the land of the Brits.

  uk_economic_estimtes.pnguk_economic_estimtes.png

… and in terms of government balance over-optimism???

uk_gaovernment_balance_projections.pnguk_gaovernment_balance_projections.png

The UK government’s projections are based on real GDP growth of 1.3% and 3.5% in 2010-11 and 2011-12, respectively while the (extremely and unrealistically optimistic) consensus estimates stand at 1.2% and 2.1%, respectively. The latest estimates announced by the EIU (Economist intelligence unit) in March 2010 are even lower at 1.2% and 1.5% for 2010-11 and 2011-12, respectively. The European Commission has also raised similar concerns with the Commissioner for Economic and Monetary Affairs, Olli Rehn, criticizing governments after scrutinizing the strategies of 14 countries, including Germany, France, Italy, the U.K. and Spain, that “their budget projections were based on favorable macroeconomic assumptions after 2010 that may not materialize” (stated in a press article on March 18, 2010)
Raising concerns on the UK, the European Commission also stated that “The U.K. won’t meet the EU’s recommended target of reaching a 3% budget deficit by 2014-15, and projections for economic recovery may also fall short. Details on how the U.K. government, whose budget deficit is expected to hit 12.7% in the current financial year, will rein back its spending are also lacking. The absence of detailed departmental spending limits is a source of uncertainty”.

Continuously rising fiscal deficit has led to a continuous increase in the government total debt, which increased from 43.3% of GDP in 2007-08 to 72.9% in 2009-10. Moreover, according to EU Commission estimates, after Ireland, the UK is poised to incur the worst deterioration in the gross debt ratio in the EU, from 44.2% of GDP in 2008 to 88.2% of GDP in 2011. Though the average maturity of UK’s debt is considerably higher compared to other nations (thus no refinancing risk in the near future), the expanding interest burden is exacerbating the already strained fiscal deficit.

Moreover, rising debt not only restricts government’s fiscal stimulus and support to the economy, but is also forcing the government to undertake sharp fiscal consolidation measures to moderate the adverse impact of rising interest expenses on the fiscal deficit. This is bound to have an internal deflationary effect.

The government expects an increase in its debt from 55.5% of GDP in 2008-09 to 90.9% in 2012-13. In absolute terms, the government debt is expected to grow from £796.4 billion in 2009-10 to £1,486.2 billion in 2012-13. However, we expect the debt to increase much higher off higher primary deficit owing to relatively lower GDP growth assumptions.

And what about Italy???

Again, we’re glad you inquired. Subscribers should download  Italy public finances projection2010-03-22 10:47:41 588.19 Kb as well as the Italian Banking Macro-Fundamental Discussion Noteand the

 Spanish Banking Macro Discussion Note in anticipation of our upcoming Spain analysis, which should be a doozy!

This is Italy’s presumption of economic growth used in their fiscal projections:

italian_real_gdp_growth.pngitalian_real_gdp_growth.png

image006.pngimage006.png

image042.pngimage042.png

For those that don’t subscribe, there is still a lot of nitty gritty that I made publicly available on Italy here: Once You Catch a Few EU Countries “Stretching the Truth”, Why Should You Trust the Rest?

More on Euro stretching of the truth

If you haven’t had your fill of innuendo, ambiguity, creativity and sleight of hand (my polite way of saying “lying”), you can peruse Smoking Swap Guns Are Beginning to Litter EuroLand, Sovereign Debt Buyer Beware!

For the complete Pan-European Sovereign Debt Crisis series, see:

1. The Coming Pan-European Sovereign Debt Crisis – introduces the crisis and identified it as a pan-European problem, not a localized one.

On a closing note….

Contact me to learn more about Veritaseum’s unbreachable, blockchain-based smart contracts. reggie at veritaseum.com

via http://ift.tt/28WsrgF Reggie Middleton