Greek exit may plunge Britain into a second recession

PanARMENIAN.Net - A Greek exit from the single currency threatens to plunge Britain into a second recession equal in ferocity to the record postwar slump of 2008-09, according to the expert responsible for the government's economic forecasting, the Guardian reports.

Robert Chote, chair of the Office for Budget Responsibility, who was speaking to the Guardian as world financial markets staggered to the end of a week that rekindled memories of the collapse of Lehman Brothers in 2008, warned that there was risk that a fresh downturn would do irreparable damage to the UK. Britain has made up less than half the ground lost when output plunged by more than 7% in 2008-09, and Chote said there was a risk that "you go down and you never quite get back up to where you started".

In a separate exclusive interview, Alexis Tsipras, the increasingly powerful 37-year-old Greek politician now regarded by many as holding the future of the euro in his hands, said that he was determined "to stop the experiment" with austerity policies imposed by Germany. He described the tax increases and spending cuts as a "crime against the Greek people".

The leader of the Syriza party, whose success in last month's general election has led to political paralysis in Athens and a second general election, said he wanted Greece to stay in the euro, but was fighting capitalism. "On the one side there are workers and a majority of people, and on the other are global capitalists, bankers, profiteers on stock exchanges, the big funds. It's a war between peoples and capitalism ... it is the international financial system, and more especially banks, that are gaining most".

The head of the UK's OBR said the deepening crisis in the eurozone could force him to tear up his forecasts, made only two months ago, that Britain would post modest growth of 0.8% this year. "The concern is that you end up with an outcome in the eurozone that creates the same sort of structural difficulties in the financial system and in the economy that we saw in the past recession, and that has consequences both for hitting economic activity in the economy, but also its underlying potential," said Chote.

Chote said he was particularly concerned about the possibility that a second deep recession would leave permanent scars. "That means not just that the economy weakens and then strengthens again – it goes into a hole and comes out – but that you go down and you never quite get back up to where you started."