By this time next week Gibraltar will have a new chief minister. Peter Caruana could be settling back in his previous four-term chair or Fabian Picardo or even Keith Azopardi could be busy measuring their office at Number 6 for curtains. Any of the three will be experiencing euphoria but it might be short lived.
Their arrival in the hot seat, either as a seasoned leader or a new broom, could coincide with financial meltdown in wider Europe. It will not be of Gibraltar’s making nor can the Rock influence its outcome. However the new government will have to deal with its effects on the local economy.
On Wednesday the countdown started. In the words of the EU’s Economic and Monetary Affairs Commissioner Olli Rehn: “We are now entering the critical period of 10 days to complete and conclude the crisis response of the European Union.” The TV news channel, CNN, even has modelled the 10 days on an Advent calendar.
The mood of gloom was set by Gerard Lyons, chief economist at Standard Chartered, who said in his Economic Outlook for November: “The euro cannot survive in its present format. Throughout the year I have stressed that the world economy could suffer a double-dip if it was hit by one of three factors: an external shock, a policy mistake or a loss of confidence. Unfortunately, in recent months, the euro area has been hit by all three. And that is why the euro area will slip back into recession in 2012.”
The news from London is that the Treasury is involved in intensive contingency planning for Greece and possibly Italy, Spain and Portugal quitting the eurozone. British banks have been urged by the City watchdog that they must brace themselves for the collapse of the single currency. Of course Britain’s banks are Gibraltar’s banks so what hits the UK will hit here too.
There is also a bigger threat closer to home. Economically Gibraltar and the Campo region along with wider Spain are interconnected. If they catch economic cold in Madrid or La Línea the sneeze can be loudly heard on Main Street. If the euro is shaken by Greece’s exit, the rumble will be felt here. If Spain is also forced out of the common currency and returns to the peseta Gibraltar will not escape Scott free.
Gibraltar is not able to seek succour in its close links with the UK or sterling. In the Tuesday Autumn economic statement Britain’s Chancellor of the Exchequer George Osborne painted economic gloom right through to 2017. However he was very careful to point out that if the euro implodes and the EU economy with it even that pessimistic projection goes out of the window.
Gibraltar’s gross debt is believed to be around half a billion pounds. That equates to 16,000 pounds for every man, woman and child on the Rock. Yes even our children are already bearing the burden. If the financial sector, gaming and tourism are badly hit by the gathering storm then using a quote from the 1996 GSD manifesto this “millstone round the necks of future Gibraltarians” could sink us all.
