Yanis Varoufakis has criticised Liz Truss’ latest gift to the upper class. The new UK prime minister has afforded tax cuts to the ultra-rich of the country, causing the British pound to nosedive.
As ever, it is the lower and middle class who will pay for what Varoufakis described as a “rookie mistake” by Truss’ government, with welfare payments and public investment likely to be cut to appease the wealthy.
“This is not a sterling crisis, this is not a debt crisis. Britain is not Greece or Argentina. You issue the currency in which you borrow and that means that you’re never going to have the problems that Greece or Argentina did,” Varoufakis told BBC Radio 4.
“This is an interest rate crisis because at the moment we have inflation running at around 9-10% in the UK, we have a current account deficit of 8% and now we have this remarkable largesse lavished by Liz Truss on the wealthy.
“The Bank of England knows that with these numbers, to stabilise the market for public debt through guilds, on one hand, and the value of the pound, it should push interest rates to 6% – this is my estimation of what would now stabilise the money market in Britain.
“But that would break the housing market. It would cause untold hardships on the middle classes that have indebted themselves hugely over the last 10 years.
“The British economy has been addicted to low interest rates and now this fiscal largesse of this government is a rookie mistake,” he added.
“Nevertheless the Bank of England is now forced to push interest rates up very quickly. What it did today was to buy time by reversing quantitative tightening and more QE. But now you have a situation where the Bank of England is going to raise interest rates until the housing market does break.”
While Varoufakis is known to staunchly be against the International Monetary Fund, he did however agree with them on their view that the UK should reconsider these measures.
“Absolutely. I very much fear, however, that this Chancellor is going to make a bad thing worse,” he said. “That he is unwilling to reverse course and what he is going to do is precisely the wrong thing.
“He’s going to cut welfare payments and public investment, making it much harder for Britain to recover.”
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