UK Slouches Into Austerity Recession
The economic numbers out of London this morning are dismal.
Instead of the 0.5 percent growth in GDP that was forecast the British economy contracted by 0.5 percent—a total swing of negative 1 percent growth.
The open question is this: What is the cause of the drop?
Weather appears to have been a factor in the decline. Heavy snowfall at the end of last year, most people familiar with the situation seem to agree, dampened economic growth to some extent.
But there is disagreement about the extent to which the ugly data was caused by weather alone—with some beginning to question the fundamental policies of austerity put into place by this British government.
"But with public spending cuts set to bite this year into what already looks a fairly soft starting point, concern over the effect of the UK's ambitious budget restraint on its growth could begin to mount and willingness to hold sterling-based assets deteriorate."
George Osborne, the current Chancellor of the Exchequer, the English equivalent of our Treasury Secretary, is not conceding the point:
"However, George Osborne, chancellor, said that while the numbers were "obviously disappointing", the government would press on with its cuts to public spending."
Perhaps more to the point, Osborne said: "There is no question of changing a fiscal plan that has established international credibility on the back of one very cold month. That would plunge Britain back into a financial crisis."
And the backlash has already begun: Labor has jumped on new data to criticize policies they've long derided.
"It is now becoming even clearer that when David Cameron and George Osborne complacently congratulated themselves in the autumn for securing economic recovery, this was in fact the result of decisions taken by the Labour government to get the economy moving again."
While this may sound like yet another English political fisticuffs, the implications are much broader: Fundamental questions about how governments can best fight recession in an era of rising deficits and swelling national debt extend far beyond The House of Commons.
Questions? Comments? Email us atNetNet@cnbc.com
Follow NetNet on Twitter @ twitter.com/CNBCnetnet
Facebook us @ www.facebook.com/NetNetCNBC