FactCheck: Is the eurozone crisis strangling Britain’s recovery?
The claim 
“There’s no doubt that growth in Britain, jobs in Britain, have been hit by what’s going on in the eurozone.”
George Osborne, November 11 2011
Cathy Newman checks it out
If you’ve got a hard hat hanging around, it’s time to put it on. Because it looks like this week, every day will bring yet more economic doom and gloom.
Tomorrow, October’s inflation figures are expected to be high enough to force the Bank of England governor Sir Mervyn King to write his eighth letter of explanation to the chancellor.
On Wednesday, the Bank of England slashes its growth forecast and unemployment figures show a million under-25-year-olds out of work.
On Thursday, we’ll find out what effect this is all having on the high street with the release of October’s retail sales figures. So you could forgive George Osborne for cowering in the Treasury waiting for the next bombshell to fall.
Except the chancellor’s been at pains to connect disappointing jobs and growth here with the drama in Europe. Will that wash?
The analysis
Growth
Now news of the eurozone’s weaknesses – and the frailty of the Greek economy in particular – has been bubbling away for a while, but fears that the sovereign debt crisis could spread to the larger economies of Italy and Spain only began to circulate widely in the summer months.
So there would only be evidence of an immediate knock-on effect on UK growth if GDP slumped suddenly in the third quarter of this year.
In fact, the figures show that the UK economy has barely been out of recession over the last year and there is no clear evidence of a recent change in trend.
The figures for the last four quarters were -0.5 per cent, 0.5 per cent, 0.1 per cent and 0.5 per cent – almost a flatline.
By contrast, France and Germany’s growth figures were higher than the UK in the second half of last year and the first quarter of this year and have slumped more recently – a more likely sign of the debt crisis effect.
Jobs
Unemployment began to rise well before the eurozone crisis too. Government statistics show a rise from 2.45 million people in the three months from March to May to 2.57 million from June to August.
That’s a quarter-on-quarter rise of 4.7 per cent and a similar rise year-on-year.
We’ll have to wait until the next set of figures are released later this year to measure the full effects of the events of the last three months in Europe, but a recent survey from the Chartered Institute of Personnel and Development expects UK unemployment to rise again from October to December.
Trade
As the Institute for Public Policy Research have pointed out, export volumes to other EU countries hit a record level in August, with levels up 5 per cent on a year earlier.
During the same period, export growth to the rest of the world grew by less, precisely the opposite to what you would expect if the eurozone crisis were hitting UK firms who sell to the continent.
We should point out that while the IPPR dloesn’t agree with Mr Osborne that the debt crisis is strangling the recovery, the think tank doesn’t follow Labour’s line that the chancellor’s austerity measures either, preferring to focus on the continuing effects of high oil and food prices.
Cathy Newman’s verdict
George Osborne’s problem is that the UK economy started to flatline well before the eurozone went into meltdown in the summer months. And unemployment also began to rise well before the likes of Italy hit trouble.
So the chancellor can’t blame our current woes on what’s going on across the Channel. However, we’ll certainly be feeling the effects of the eurozone debacle in the coming months. Then the blame game will really begin in earnest.
There are 7 comments on this post
Don’t I seem to recall Osborne & Cameron pouring scorn on Gordon Brown’s claim that the UK recession 2008/9 & the rising deficit were caused to a significant extent by external factors – e.g. the world economic collapse? The truth in both cases is that it is a mixture of the wrong domestic economic policies interacting with the world economy that causes these problems. Under Brown, the UK was spending too much in relation to its medium term tax capacity. Now spending cuts are contributing to low economic growth & the hoped-for counterbalancing of the private sector taking the strain isn’t happening sufficiently.Jobless people or those who are being forced to make do on lower incomes are those who get the rough end of this 1930s economic strategy.
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There is absolutely no way that the Government can blame the eurozone crisis for the flatlining of the economy. Osborne knows full well that there are timelags in economic indicators and he is therefore being very disingenuous with the facts.
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It doesn’t matter whether Osborne or Cameron can blame our problems on the eurozone or not, they are not interested in the facts but merely in playing the blame game to keep the finger from pointing at them. Once the euro crisis subsides they will find another ‘reason’ for why their ideology has failed the UK. After all, they were desperate enough to blame a royal wedding in the spring and snow last winter (who’d have thought – snowy weather in the winter!).
These are just overgrown schoolboys playing at being headmaster and headmistress. We need some politicians with common sense and real life experience to create the right conditions for growth. But I am not holding my breath.
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Flatlining is good while public jobs are being dismantled. “Growth” would only such in imports at the moment. We need to rebuild savings.
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Great to read an honest and factually based article on this issue.
Cameron and Osbourne have been busy using the “it`s all labours fault” excuse for their failed austerity agenda by blaming the Eurozone problems for the flatlining of our economy. Unfortunately for both of them we still have a free press and a reasonably clued up part of society who aren`t going to let them get away with it. The condems must be held to account for their lies and more lies
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They now blame the Eurozone crisis ; before it was the policy of the previous Brown government and before it was the World crisis .
The way it goes tomorrow it will be the Jews ( worked well in Germany in the 30′s ).
They have an economic policy based on ideology and not facts and they are not willing to change it because it is only the lower class which is suffering from it.
For the same ideological reasons they ask the EU to do more to find a long term solution , when this solution is to go to more integration like fiscal one . But this is exactly what the Conservatives don’t want !!!!
How can they fool the citizens by making them believe the UK can stay in the EU if they intend to reduce the EU influence on the UK life .
You can have it white or have it black but not both at the same time.
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Cathy,
Nothing if not interesting the way the bankers casino ripoff has translated into “public debt” and “eurozone problems.” The propaganda is now at such laughable levels it is scarcely worthwhile engaging the details. Now of course the bankers have put their own men in place in Greece and Italy to make sure the ripoff continues, but in a different form.
The only real questions now are:
(a) How do we get rid of the lot of them?
and
(b) How do we form a true democracy that responds to the social and economic needs of its citizens?
If neither of these questions are answered adequately we can expect what’s left of our society to decay into totalitarianism and a permanent state of foreign wars.
George Orwell was even more prescient than he thought.
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