he term “PIGS” is often
heard now as a collective
term for Portugal, Ireland,
Greece and Spain. The
attention is because of their
economic difficulties. This
copy is published some
weeks after it is written and
some of the problems may
have been tackled by then,
but I doubt it.
Speaking as one who opposed the
euro from the outset, you could see
this problem coming a mile away.
Cobbling together a diverse set of
cultures and economic profiles of
varying maturity and saddling them
all with an interest rate to suit a
Germany imbued with a strict sense
of fiscal probity following the 1920s
hyperinflation experience was always
going to represent a triumph of political, wishful thinking over market
pragmatism. And so it has proved.
Spain and Ireland saw huge
property booms as low interest rates
dictated by the European Central bank
encouraged speculation and, in so
doing, emphasised the euro’s critical
flaw: a one-size-fits-all interest rate.
Portugal is just unlucky. Its economy saw no boom, but is now suffering
Greece has annoyed investors with
an admission that its government debt
figures did not meet the accuracy and
truth requirements essential to any
relationship and, with big tranches of
government debt due to be repaid in
April, the crunch may yet come.
The City is also threatened by the
high personal tax rates imposed by the
Labour government in its last budget,
one that ignores the lessons of the past.
When Margaret Thatcher took power
the top 1% of UK earner paid 11% of all
personal tax collected. When her chancellor dropped the, then-crippling, top
tax rates, the percentage harvested from
that same group rose to 22%.
The take from the top 1% is plummeting right now as they head for the
airport with a one-way ticket or take the
kids for the first long family holiday for
many a year and arrive home early from
the office every night.
The UK economy has arrested its
decline, though only the bottom rung
of a long ladder has been grasped.
Companies are now threatening to join
the exodus as senior managers decline
moves to London and company taxation
becomes ever more onerous.
Margaret Thatcher once said that the
problem with Socialists is that eventually they run out of other peoples’ money.
Looks like she might be right. TSL
Robert Lefroy is editor of Business Money, the first dedicated commercial finance
journal in the UK. He can be contacted at