Greece’s financial crisis and the recent plunge in oil prices pose real risks to Britain’s economy, the chancellor warned in his budget speech, even as he unveiled better than expected growth forecasts for the UK.
The new Greek government is at loggerheads with much of the rest of the eurozone – especially Germany – after backing away from previously agreed austerity measures.
An EU summit on Thursday will be the latest attempt by political leaders to resolve the impasse, amid fears Greece could be forced into capital controls or even an exit from the eurozone.
Osborne said the Office for Budget Responsibility had revised down its forecast of economic prospects for the eurozone and said the current standoff with Greece could be very damaging to the British economy.
“I agree with that assessment,” he said. “A disorderly Greek exit from the euro remains the greatest threat to Europe’s economic stability. It would be a serious mistake to underestimate its impact on the UK, and we urge our eurozone colleagues to resolve the growing crisis.”
He said the problems in Europe meant Britain had to expand its links with the faster growing economies in the world. “We’ve made major progress this parliament. I can report that the trade deficit figures published last week are the best for 15 years.
“And we will do even more – I am again increasing UKTI’s resources to double the support for British exporters to China.
“We have also decided to become the first major western nation to be a prospective founding member of the new Asian Infrastructure Investment Bank, because we think you should be present at the creation of these new international institutions.”
The slump in the oil price has seen Brent crude more than halve since last June, on fears of falling demand and oversupply. Osborne said: “This is positive news for the global economy. But the overall boost this provides has not yet offset the rising geopolitical uncertainty it causes.”
