Economic headlines in Britain have been bleak in recent weeks. The government has a multibillion pound black hole to fill in the Budget on November 26. Meanwhile, the cost of long-term UK government borrowing has risen to its highest level since 1998. Some commentators have even talked about a repeat of 1976, when the UK was rescued by a loan from the IMF.
Some of this talk is massively overblown. The UK has no problem finding buyers for its bonds at higher yields (a recent gilt auction was oversubscribed tenfold), has no exchange rate peg to defend and thus has no need to turn to the IMF. British government debt has an average maturity of 14 years, so the country can switch to issuing shorter-term debt if long-term costs are high.
While the UK faces fiscal challenges, it is far from unique. Some other developed countries face even deeper problems. Britain currently has a smaller budget deficit (as a percentage of GDP) than the US or France, a lower government debt-to-GDP ratio than Canada, the US, Italy or Japan, and its debt service costs, as a percentage of GDP, are lower than those of Canada, Italy and the US.