Cameron says Britain must heed Greek warning

* PM Cameron says Greece shows deficit action needed

* Cameron says tough action fraught with political danger

* Spending review process to be announced on Tuesday

* Interest payments could reach 70 bln pounds in 5 years

By Keith Weir

MILTON KEYNES, England, June 7 (BestGrowthStock) – Prime Minister
David Cameron told Britons on Monday the scale of the country’s
budget problems was even worse than he had anticipated and cited
crisis-hit Greece as an example of the risk of failing to act.

Cameron painted a bleak backdrop two weeks ahead of an
emergency budget on June 22 in which his coalition government
will give more details of measures to cut a deficit running at
11 percent of national output.

Giving few details of where cuts will come, he attacked the
previous Labour government for economic mistakes over the past
decade that he said had left the legacy of a debt crisis.

“Greece stands as a warning of what happens to countries
that lose their credibility, or whose governments pretend that
difficult decisions can somehow be avoided,” Cameron said in a
speech in Milton Keynes, central England.

“I want to set out for the country … why the overall scale
of the problem is even worse than we thought,” he said, adding
that the structural nature of the debt meant “a return to
(economic) growth will not sort it out”.

Cameron said the public sector had grown too large under
Labour. If no action were taken, within five years its
debt-servicing costs would be more than it spends on schools in
England, climate change and transport combined.

“Based on the calculations of the last government, in five
years’ time the interest we are paying on our debt, the interest
alone is predicted to be around 70 billion pounds ($101
billion). That is a simply staggering amount.” [ID:nCAM070610]


Cameron said the weekend summit in South Korea of the Group
of 20 leading economies had endorsed the steps taken by Britain.
The government, which took office last month, has already
trimmed six billion pounds in costs to start to reduce a deficit
that reached 156 billion pounds in the financial year to April.

In opposition, Labour has warned that cuts planned by the
coalition risks killing off a fragile economic recovery and
throwing Britain into a double-dip recession.

Cameron acknowledged the cuts to come would hurt a
government still enjoying something of a honeymoon with voters.

“This is fraught with danger. This is a very, very difficult
thing we are trying to do,” he said in answer to questions at
distance learning institute the Open University.

Cameron heads Britain’s first coalition government since
1945, his centre-right Conservatives having teamed up with the
smaller Liberal Democrats after last month’s election.

Flanked by Lib Dem Treasury minister Danny Alexander,
Cameron said the coalition would make it easier to win over the
public, saying there were “two parties together facing up to the
British people.”

Economist Alan Clarke of BNP Paribas said it was natural for
a new government to lay the blame for ills at the door of its
predecessor and that the message for the budget was clear.

“Fiscal tightening, spending cuts and tax increases are
going to bear down on growth and disposable income. It’s going
to hold back growth which is going to hold back inflation. It’s
not going to be pleasant for anyone,” Clarke said.

Finance minister George Osborne and Treasury number two
Alexander will present on Tuesday the framework for a spending
review this year.

The Treasury is expected to consult on the spending review
with the private sector, voluntary organisations, trade unions
and the general public.

Investing Advice
(Additional reporting by Matt Falloon, Tim Castle and Peter
Griffiths; Editing by Ruth Pitchford)

Cameron says Britain must heed Greek warning