If recent predictions are anything to go by, this proclamation means that the Greek economy will record double-digit growth in Q2, Spanish banks will prove to be watertight after all and everyone will be wondering what all this austerity carry-on was about anyway.
Unfortunately, this is one prediction King may get right. The odds are now stacked heavily in favour of a Grexit. Policymakers and businesses alike are preparing for it, the markets are pricing it in.
The thing is, nobody knows for sure quite what to price in, as we haven’t got a clue what will happen if Greece does indeed drop out of the Euro. Contingency plans, which King alluded to, mean diddly squat. The fact is, we’re going into this one in the dark.
Euro-meltdown aside, the Bank of England took a hatchet to the UK’s own growth forecast for this year, reducing it to 0.8% from 1.2%. Inflation hitting its target of 2% has also been readjusted, from the end of this year to the middle of 2013. Another fail for the Bank and another example of the futility of any type of economic forecasting.
And on the subject of futility, that brings us to the high street banks — and getting them to lend. One thing King touched upon early on in his speech was how credit availability in the economy would remain very subdued in the current climate.
For once, he’s not wrong. Extreme caution at the banks is hammering business and — as readers of this website will know — it is hammering the property and mortgage markets. Well, for owner-occupiers anyway.
From where we’re standing, professional property investors are getting busier the worse the storm gets. Buy-to-let, in particular, is booming. After all, investors know that times of extreme volatility generate once-in-a-lifetime opportunities.