The United Kingdom is the world's fifth largest economy and the economic slowdown currently occurring in the U.K., to some financial experts is analogous to the economic slowdown in Portugal, Greece and Spain, which are much smaller economies. Despite the U.K.’s economic slowdown, it has the highest rating for its government debt (gilts) on the international money market. A representative from the U.K. Treasury stated that all three major credit-rating agencies had reaffirmed the U.K.'s triple “A” credit status, which allows the U.K. to borrow at very favorable interest rates because the U.K.'s triple “A” credit rating means that the U.K. has a very low risk of default. However, some economist argue that the U.K.’s excellent government credit rating is due more to the U.K.’s past legacy of good repayment history than a reflection of its current economic status, as the most excessively-leveraged country in the G7. A short documentary clip explaining the U.K's growing debt crisis is available here. Simon Johnson, a former International Monetary Fund (IMF) chief economist, points out that “the financial markets are taking a long hard look at the fiscal accounts of all these [Euro zone] countries and they don't like what they see.” This is all very fascinating to me, because the U.K. “officially” came out of a recession in the fourth quarter of 2009 (December 2009), which ended six consecutive quarters (1.5 years) of economic decline in the U.K. Economic growth for the U.K. during the last year was a mere 0.1%, which is much less than economists expected, and more analogous to the growth rate of a developing country. Typically when a country is in an economic slowdown, the government increases spending to give the country an economic boost. This is classic Keynesian economics that was applied during the Great Depression by President Roosevelt in the United States under the New Deal Programs, and fiscally analogous to President Obama's current U.S. economic stimulus package. However, one of the major concerns about a country having large budget deficits is that it cannot spend sufficiently to boost its economy. This is precisely the issue that certain commentators have raised about President Obama’s economic stimulus plan; the plan needs to be more aggressive—more money needs to be spent to really jumpstart the U.S. economy.
A spokesman for the U.K. Treasury stated, "it is right that borrowing has been allowed to rise so that the [U.K.] government has been able to protect the economy from the global downturn.” Additionally, a representative from the British Chamber of Commerce (BCC) stated that “despite the U.K. coming out of a recession, there is still a long way to go to economic recovery.” Ironically, despite the British government’s fiscal plan to jumpstart the U.K. economy, last week the Euro reached a seven month low against the U.S. dollar. The drop in the Euro’s value could not have occurred at a worst time for two reasons. First, it made traders worry that Greece's huge government debt problems could spread to other European countries such as Spain, Portugal, and the U.K. Second, it motivated Mr. Johnson, the former chief economist for the IMF, to describe the G7 group of leading economies as "fundamentally useless." Mr. Johnson criticized the G7 organization because it “did not react quickly enough” to the global economic problem, and for “remaining in an out-of-date mindset.” He continued that "the financial markets are taking a long hard look at the fiscal accounts of all these [Euro zone] countries and they don't like what they see." I previously commented on the G20's need to require member countries to implement fiscal monetary policies in September 2009. Mr. Johnson further noted that the "[the G7] seem to show no awareness at all that much of Europe is facing a serious crisis and it's not limited to Spain, Greece and Portugal, it's also going to include Ireland. I think Italy is also very much in the line of fire. There's a very serious crisis inside the Euro zone," Johnson warned. 
Mr. Johnson’s comments occurred just hours after the G7 finance ministers held a meeting in northern Canada, at which the European countries had to reassure their counterparts from the US, Canada and Japan over the deteriorating state of the public finances in some Euro zone countries. The G7 finance ministers agreed, not to involve the IMF and to leave the matter to the European Union to resolve. UK chancellor, Alistair Darling, who was at the G7 meeting, commented that the world was set for a steady but slow recovery and that the various governments' economic stimulus packages should remain in place until the recovery was assured. His final words at the meeting ended on a hopeful note, "the important thing is that we all are absolutely committed to maintaining the support for our economies until we make sure we have recovered….” The same can be said for the U.S.
