Cameron is wrong, UK is not like Greece

Back in the autumn of 2008 I wrote in this column of risks that the credit crisis could spread from the banks to sovereign nations.

What worried me then were indications from the market in sovereign credit default swaps — insurance against governments reneging on their loans — that the creditworthiness of some nations, including Greece, Portugal and Spain, was under strain and that the single European currency could be at risk of disintegrating.

"Politicians within the eurozone need to face the reality that larger, richer countries will need to help their smaller brethren ... or the single currency could be jeopardised," I concluded.

So it has turned out: a reluctant German populace has to bail out the Greeks.

Gordon Brown may have failed to convince voters in last week's leaders' debate, but they should be thankful to him for one thing at least: we are not members of the single currency zone so we have exchange rate and interest rate flexibility.

We are also out of the front line of the Greek bailout. Despite David Cameron's mutterings, the UK's situation is a long way from that of Greece.

We still have a triple A credit rating and there seems little imminent danger of a downgrade.

Our debt has a longer maturity than other G7 countries, at about 14 years compared with seven years for Greek borrowing. A much lower proportion of our gilts — government IOUs — are held overseas, about 30 per cent or so, and our credibility on managing the public finances is far stronger.

Despite election uncertainty, we have a pretty stable political system by international standards.

Greece was run by a military junta as recently as 1967 to 1974, while the UK has a centuries-long parliamentary democracy.

Whoever takes power after the election, Britain is not yet about to be run by out-and-out nutters.

That doesn't mean we don't have a problem with the size of our deficit: we do.

Getting the deficit under control is hugely important.

Even if the financial sector is brought into order, the next crisis is already building and it is in pensions and the ageing population.

As Alex Brummer expounds in his new book The Great Pensions Robbery, Brown's 1997 removal of dividend tax credits turned the UK's solid final salary provision into a basket case and reduced incentives to invest in the British stock market.

The damage will make the burden on the taxpayer even more onerous: a pensions crunch is following hard on the heels of the credit crunch.

Whoever wins control has three priorities: cutting back the deficit, taming the banks and finding a route to sustainable growth.