From the eurozone Britain has crucial assets

At the worst of the recent attacks in the financial markets against the euro, the pound sterling is paradoxically almost emerged as a safe haven; No commentator had dared to dream in recent months. But the British currency is still permanently entitled to this status and the feeling which predominates is that it remains very vulnerable. In the last, week which saw moved to Whitehall course, a new Government, the sterling climbed 1 against the euro, but fell by 2 against the dollar, 1,4586 dollar for a book - it approaches of its more lower for more than a year to the US dollar-, and 3 against the Japanese yen.

From the eurozone, Britain has crucial assets. First, the level of its currency is better suited to the situation of the economy and public finances of the country that it is for the countries of southern Europe. The book therefore better play its role of variable of adjustment and may make the British economy more competitive in the export. Then, as explains Simon Hayes, an economist at Barclays, "the euro crisis is less a crisis of sovereign debt of some countries of the zone as a problem of confidence in institutions which should address these imbalances." "But Britain enjoys solid institutions", he said. Finally, the State is sovereign to print its currency, a tool that can not be used lightly, but which excludes the risk of failure which has undermined some euro area countries.

Two more technical factors also benefit Britain: first the maturity of its debt is 14 years old on average, 2 to 3 years for many European countries. then, British domestic pension funds are obliged to buy lot of treasuries (gilt) for regulatory reasons, so, explains Simon Hayes, that the request, including on long-term borrowings, is very strong.

Risk of runaway

That said, Britain shows a deficit of 160 to 170 billion pounds, or more than 11 of GDP. Therefore the risks of runaway of the debt of the country, even if it is currently relatively low - less than 50 of GDP - are high. In addition, the new Government made no secret that the efforts requested from public service and the British in General would be severe to restore public accounts. The value added tax could well be relieved by 2 to 3 points, around 20. The Government plans to reduce the train of life of the State of 6 billion from the current fiscal year. The Chancellor of the Exchequer, George Osborne, is less than two months to formulate an emergency budget. The pressure on the growth will be strong and Alan Clarke, BNP Paribas, cited by the Agency Bloomberg, the Bank of England may have to relaunch its monetary creation ("quantitative easing") of 50 billion program, which is unfavourable to the book.

Finally and above all, the British currency is dependent on the strength of the coalition in power between the tories and the Lib-Dems. Once the Government instability threatens, the sterling falters because it is imperative that correct public accounts. "Foreign investors, who hold 28 of the British State loans, are particularly sensitive," notes Simon Hayes. For the decline of the book, now an asset does not turn in free fall, the Government of David Cameron must keep its promises.