Austerity and poverty - between a rock and a hard place

Oliver Twist

Here's the latest from our Highly Placed Professional.

On a day that the UK unemployment rate fell by 0.1 % to 7.7% (albeit with youth unemployment at 1 million), there was a timely reminder from Oxfam about the effects of so-called government austerity.

Almost 2 million adults and 800,000 children in the UK face the risk of sliding into poverty, according to Oxfam. Worse still, 25 million adults across Europe risk falling into the same trap by 2025.

Now there's something a bit random about these over-arching statements, which do seem somewhat hypothetical and designed to shock and possibly influence government policy.

Oxfam's real gripe, of course, is about government austerity measures. Unfortunately, we in the markets know that austerity has become the universal ticket to global market access, without which states would not be able to fund themselves, or to receive IMF and EU bail-outs.

Despite the obvious benefits of welfare programmes and safety nets across Europe, we also know that abuses of these systems for both political reasons - and sometimes individual gain - have inexorably led to the sovereign debt crisis. And it's this crisis that's in turn resulted in austerity.

So we are simply caught between a rock and a hard place. European lifestyles have probably been artificially propped up, or subsidised, by successive welfare programmes, but states no longer have the money to continue on that merry road.

Oxfam's statement serves as a very sober warning of what's to come, but it won't do much to change government policy. As Labour once famously said, 'We've spent all the money!'

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