Finland Predicts Eurozone Break Up

Last week, Finland announced that it will not tolerate further bail outs and is preparing for the breakup of the Eurozone. The current system of EU bailouts is unsustainable as Europe will run out of money the way they are going. It is a credit to the Finns that they are ready and willing to discuss it openly. The current system encourages inefficiency but nobody in Europe is prepared to be the first to leave the Euro and take all the blame. The future of the Eurozone is unclear although a breakup of the Euro will not necessarily lead to a breakup of the EU. It could actually strengthen it by passing fiscal and monetary powers back to the sovereign states.

UK Government Considers Nationalising RBS

Cabinet minsters have entered into discussions over the proposal for the government to buy the remaining 18% of Royal Bank of Scotland (RBS) and nationalise the bank. A nationalised RBS could be used as a vehicle to promote lending to small businesses and stimulate growth in the UK economy. We believe the idea clearly has merit as the large UK banks have consistently failed to lend money to small businesses. RBS is suffering from reputational issues following its government bailouts and a nationalisation of the bank could offer it new direction and increase its competitiveness in the UK marketplace. 

George Osborne is opposed to the project as it will cost approximately £5 billion to buy out the private investors holding RBS shares.

Post Olympic Slump Anticipated

The buzz around London is beginning to fade following the completion of the London 2012 Olympic games. Many are predicting a post Olympic slump in the UK economy. This was evidenced in many of the previous countries that hosted the Olympics including Australia and China. 

Whilst the Olympic games were a success and we thoroughly enjoyed them, one cannot escape the fact that the Games will cost in the region of £12 billion according to latest estimates which is significantly in excess of the original budget of £2.4 billion. This is an exceptional amount of money for an event lasting only 3 weeks. Whilst there will be some lasting benefit from the redevelopment of the brownfield site in Stratford, the majority of the stadia will be dismantled after the games and will not contribute to the Olympic legacy.

The traffic chaos caused by the Olympic lanes, together with the large reduction in British people commuting to London during the games means that we can expect very low levels of productivity in August once these figures are announced. Anyone walking through London will have noticed that the city center was a “ghost town” during the games. Catering companies are likely to have performed well during the games but retailers will undoubtedly have suffered. We await the August statistics to reveal the extent of the damage. 

To make matters worse for UK taxpayers, the cost of the Olympics is likely to funded by way of increased taxes in next year’s budget.