It's traditional at the turn of the year to look back at the 12 months just gone and do some pondering. Was it a good year? Will the new one be any better? And what about those New Year resolutions – how long will they last this time?
For the last couple of years in the January edition of The Gibraltar Magazine, I have set out some thoughts on the previous year from a financial perspective – and my own view as to prospects for the next. I am a natural optimist (probably an essential requirement as I work in business development) so of course I am always of the view that the coming year just has to be better than the last. But how true is this likely to be for 2011?
Consider this summary: major banks rescued; currencies under pressure; interest rates at rock bottom but bank lending still difficult; and property prices plummeting in certain countries. Sound familiar? I wrote a piece along these lines a year ago when looking back at 2009. Put another way, at first glance not much has changed in the last 12 months. But look a little more closely and in certain countries things are markedly different. Let us examine just a couple of examples close to home in the European Union.
I always find it's best to consider the UK first in any review because, here in Gibraltar, we are affected in so many ways by the state of the British economy. Although the government here manages our financial affairs, questions such as the setting of interest rates and of course the vital matter of the exchange rate – of particular importance here is the pound's value against the euro – are totally beyond our control.
In May 2010, the UK general election resulted in a hung parliament and the UK entered a new era of coalition government. The most pressing issue during the election campaign was the truly dreadful economic situation. Once in power, an emergency budget resulted in higher taxes overall and reduced government spending across the board in an effort to reduce the budget deficit.
Without wanting to stray into UK politics, the harsh medicine seems to be having a positive effect overall. Borrowing is steadying and the markets seem to have calmed down a bit. In September, the International Monetary Fund announced that in their opinion the UK economy was on the mend. We are still however in uncharted waters and any new economic waves could still prove dangerous because stability remains fragile.
High profile international events such as the royal wedding in 2011...