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EU warns UK of spiralling debt risk

The EU Commission has warned of “serious concerns” it has regarding the future viability of the indebted UK economy.

In its 2009 Sustainability Report, the EU Commission warned that a rising debt burden is putting the UK at high risk with regard to long-term sustainability of public finances. It says by 2010, the UK will be one of four EU countries to have debts of as much as 100 per cent GDP.

The report from Brussels says unless extreme spending cuts are made UK public debt will rise from 60 per cent of GDP this year to 160 per cent by 2020, 406 per cent by 2040 and 760 per cent by 2060.

It says: “The UK’s budgetary position poses severe risks to the sustainability of public finances. Reducing the primary deficit, would contribute to reducing the high risks to the long-term sustainability of public finances.”

The Treasury has lashed out at the report, according to the Telegraph.It quotes a spokesman as saying: “This report has no basis in reality and calls into question the ability of the EC to carry out credible economic analysis. It takes no account of any member state’s plans to reduce its debts and only shows what would happen if no government took any action to reduce borrowing for 50 years.

“The UK Government set out a clear plan to halve the deficit over the next four years.”

The report warned that the UK has one of the three most deteriorating GDP to debt rations on the continent, alongside Denmark and Latvia. As a result the Commission doubts that, without sufficient measures to combat debt, the UK will be able to support its aging population.

It says the UK would need a debt/GDP restructure of 8 per cent to close its “sustainability gap” and handle its long-term budgetary impact of its ageing population.

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