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Britain's chancellor of the Exchequer, George Osborne, tells parliament it will be difficult for Britain to avoid a recession if Europe goes into a recession in 2012-2013. He also told parliament that British debt reduction will take longer than planned because of the economic slowdown. This means the British public will have to go through two more years of austerity than previously planned, now upto 2017. Britain will need to borrow an additional 111 billion British pounds through 2015. Britain's Office for Budget Responsibility forecasts economic growth at 0.9% in 2011, and 0.7% in 2012. Debt as a share of GDP will peak at 78% in 2015, instead of the 71% expected earlier. With strong opposition from the unions and a major strike planned by about 2 million workers on Nov. 30, 2011, the Cameron government plans to go ahead with its austerity measures. This includes eliminating 600,000 public sector jobs, and limiting pay increases for public sector workers to 1% for two years after the end of the current pay freeze....

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The UK Office for National Statistics shows Britain's GDP declined by 0.2% in the last quarter of 2011, compared to the prior quarter. The figures showed a drop in business investment. Polls by ComRes, show 51% of people in Britain see the government austerity cuts as having an adverse effect on the economy, with cuts being larger and coming too quickly.

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When George Osborne took over at the British Treasury the deficit was 10.2% of GDP. Osborne's hope in 2010 was that the budget could be balanced by 2015, now it looks like this will happen in 2019 or later.The forecast for the end of the 2015 fiscal year is a deficit of 5% of GDP. Lower than expected tax receipts are a big reason for the difficulty in lowering the deficit. The Office for Budget Responsibility, the budget agency, has reduced the forecast for tax receipts for 2015-2019 by 87 billion pounds. This means further spending cuts will be needed, according to OBR. Budget surplus is not expected before 2019. This is happening even though lower inflation and lower market interest rates have helped reduce outlays to service the debt. OBR assumes productivity will increase to 2% for the budget to be balanced in 2019. At the average productivity growth rate of 0.5% seen since 2008, the budget deficit will still be 2.2% in 2019, in another scenario of numbers run by OBR.

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Britain's Office of National Statistics said that GDP declined by 0.2% in the first quarter of 2012 from the prior quarter. GDP declined by 0.3% in the fourth quarter of 2011. This means Britain is officially in a recession, with two consecutive quarters of negative growth. The ONS said GDP was 4.3% below its precrisis peak in the first quarter of 2008. The UK registered growth of a mere 0.4% since the coalition government of David Cameron took over in May 2010. This presents problems for prime minister Cameron in tackling the UK deficit. It also shows how difficult it will be for EU countries to address their deficits without economic growth. This has come into increasing focus with recent events in the Netherlands with the collapse of the government and upcoming elections on the issue of austerity cuts, and in France with the presidential elections and the swing to parties questioning austerity measures without economic growth.

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The high cost of fines is likely to affect recapitalization of UK banks. Fines for Libor-rigging and compensations for customers on Payment Protection Insurance may cost the UK banking industry about 20 billion pounds, says Nixon. Other fines such as the $1.9 billion fine for money laundering activities of HSBC have to be added to this. This means less money for meeting stronger capital requirements and for lending to business and households. Higher compliance costs will mean higher costs in future years. HSBC estimates of the anti money laundering systems are about $990 million a year. The Bank of England has raised concerns about the need for additional capital to safeguard British banks.

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Ajami points out the risks of the deal secularists and liberals in Egypt have made in calling on the military to upset the elected government of prime minister Morsi. The liberals and the Muslim Brotherhood were both equally opposed to the military and police intervention in politics in the period following Mubarak's ouster. The six decade rule of the military in Egypt has little to show for it in the modernization of Egypt and improving economic conditions. Egypt has seen this script before, says Ajami of the Hoover Institution- in 1952 the military stepped in after corruption in the political parties and political violence. The results were dismal extending throughout the period of modernization in Asia and Latin America. It has left Egypt frightfully behind in most dimensions of education, healthcare, and technological progess. The lack of training in parliamentary and democratic governance, and in the institutions of democracy are painfully evident- the poor roadmap for democracy laid out by the military, followed by the election, the decrees and authoritarian style critics describe of prime minister Morsi in failing to incorporate liberal opinion in policy, and the flawed secularist calls for the military to overturn the elected government with only one year in office. These institutions will take a long time to build and require patience, flexibility and the gift of wisdom on all sides....

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Krugman points out that the loss of 490,000 public sector jobs in Britain, as laid out in British Finance Minister Osborne's plan, is equivalent to the loss of 3 million jobs in the U.S.. He does not see the private sector being able to create the jobs to make up for this loss. He cites Osborne's speech to Parliament, in which he said that "Britain was on the brink of bankruptcy," as a shift in rhetoric of the Cameron government from hope to concern that jobs in the private sector would not materialize.

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Serious concern about lower consumer spending in the U.K that would reduce growth and reduce government tax receipts. The unemployment rate has remained at 7.6% for 22 months. Wage levels are not keeping up with inflation of about 4.5%. The increase in the sales tax from 17.5% to 20% has added three quarters of one percent to the inflation rate, according to the National Statistics Office. VocaLink says annual wage growth in the three months through May 2011 was 1.8%, much lower than the inflation rate. Deep spending cuts are going into effect in 2011-2012, and about 300,000 jobs would be lost in the public sector with spending cuts by 2015. The IMF has reduced its estimate for growth in the U.K. to 1.5% from 1.7%. At the same time the Bank of England is under pressure to increase the interest rate of 0.5% (which is a record low), to control inflation. Britain under prime minister Cameron plans to cut government spending from 47% of GDP to 40% of GDP over six years. This will take 6 years of spending cuts, something even a previous prime minister Margaret Thatcher was not able to do. The government's Office of Budget Responsibility predicts a drop in the deficit from 11% of GDP to 7.9% by March 2012. Yet a lot depends on government tax receipts which in turn depend on economic growth. Britain showed a large deficit of 10 billion pounds in April 2011, and the situation is fraught with a high degree of uncertainty....

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British budget cuts announced in Parliament by Britain's Finance Minister, George Osborne. About 83 billion pounds in cuts by 2015 were announced. But Joseph Stiglitz, writing in The Guardian, argued that the plan was a big gamble, as declining tax revenues with lower growth, would lead to smaller deficit reductions. The gamble is that the private sector will pick up, and make up for the reduction in public outlays. If this does not happen, this risks sending the economy into a tailspin. Osborne said that 490,000 jobs will be lost over the next 4 years, some from attrition. Payments to the long term unemployed will also be cut for those who fail to seek jobs, saving $11 billion a year. A new 12 month limit will be imposed on long term jobless benefits. Increase in the retirement age will start in 2020, from 65 to 66 years. At the same time free eye tests, prescription drugs and bus passes remain. Premier Cameron promised not to make cutbacks in health care in the period before the election. This was his way of helping the Conservatives make a comeback to power....

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Friedman on the ouster of president Morsi after only one year in office following large scale protests. He sees this as the beginning of a fallback of political Islam, with the protests of secularists in Turkey, the shift to a moderate candidate Rouhani in Iran's presidential election, the shift of the Emhada Islamist party in Tunisia to work with center-left parties in writing the constitution, and the election of a western educated political scientist to lead a coalition government in Libya. In each country the secular and liberal leaders and the young people felt the revolution was being stolen from them by Islamist parties and are asserting themselves to gain a voice in government. The Islamist party in Egypt has older leaders, an authoritarian structure and hierarchy, which failed to incorporate liberal and other opinion in writing the constitution and in forming the government. A more tolerant and open Islamist party needs to be part of a broad based government with other parties, which can focus on the economy, unemployment, infrastructure and public services....

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Britain's Chancellor of the Exchequer says Britain plans to introduce laws by 2015 to separate investment banking from retail banking. As proposed by the Independent Commission on Banking, led by John Vickers, the investment banking and retail banking would be separate legal entities and would be financed separately.

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The Washington Post is critical of the military's arrangements for the transition to democracy in Egypt. It calls on the Obama administration to make the military in Egypt accountable for a return to democratic government in Egypt, including suspension of aid. The military's role in ousting an elected government which would have been tested in coming legislative elections is seen as a serious mistake.

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The UK's Office of National Statistics said construction output fell by 3.7% in the first quarter of 2012, compared to prior year. Output fell 3%. The revised decline in GDP for the first quarter is 0.3%.