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With Economic Downturn, Bickering in Britain
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"There are responsible ways of saying these things and irresponsible ways," Hugo Dixon, editor in chief of Breakingviews.com, which monitors the financial industry, said in an interview. "He used extreme language."
Dixon, in a column published Sunday, said that Osborne was "unwise" to make public comments that could "provoke panic" but that he had "certainly put his finger on a serious issue."
"Put simply, the U.K. has an air of Iceland about it," Dixon wrote with his co-author, Edward Hadas.
"The tiny island state was brought down when foreigners lost trust in the government's ability to bail out a banking system with massive foreign currency debts at a time when the country was also running a huge trade deficit," they wrote. "After foreigners refused to finance its banks, they went bust and the country's currency sank like a lead balloon."
Dixon said U.K. banks had foreign currency liabilities that were three times Britain's gross domestic product. While Iceland's bank debt was more than seven times the GDP, the British margin is still "too large for comfort," he said.
"We're not trying to say that the U.K. is Iceland," Dixon said in the interview. "Iceland is the extreme. But there are serious vulnerabilities in the U.K. And the comparisons make for uncomfortable reading."
Mark Duckenfield, lecturer in the politics of the world economy at the London School of Economics, said comparing the two nations was like comparing "two separate universes."
"Iceland has fish, finance and tourism," he said. Britain has "a very diverse and sophisticated economy."
On the streets of London, the building recession is already leading to angst.
"People are very worried, we all are. You can see people thinking more about what they spend," said Tina Bury, 52, who runs a fruit stall in the Exmouth Market. "Customers tell me they aren't going to buy a lot of Christmas gifts, they are reining it in. A lot of people are very worried for their jobs."
Barry Allen, 50, a taxi driver working near the market, said he was trying not to let it all get him down.
"I like to look at life as half-full," he said. "I still have a job -- I'm not a gloom-and-doom merchant. The world doesn't owe us a living."
Special correspondent Karla Adam contributed to this report.
