Merriam-Webster, the dictionary publisher, has chosen "austerity" as its 2010 Word of the Year.
Merriam-Webster, the dictionary publisher, has chosen "austerity" as its 2010 Word of the Year.

Good bookkeeping is a healthy balance



Many Spanish families are ditching fine foods such as lobster this Christmas and hoping that their lottery numbers on El Gordo - "the big one" - come up.

Meanwhile in Ireland, canny shoppers are shunning party frocks and waiting for the St Stephen's Day (Boxing Day) sales.

In Iran, subsidies on petrol, regarded as a birthright, have been scrapped as the president Mahmoud Ahmadinejad's regime is said to have run short of money.

And even oil-rich Saudi Arabia is cutting expenditure in half next year.

In many places round the world, consumers are feeling the impact of tough austerity measures imposed by panicking governments. Living within your means is no longer just personally prudent - it is one's patriotic duty.

As Charles Dickens's Mr Micawber expressed it: "Annual income £20, annual expenditure£19 and 6 pence, result happiness. Annual income £20, annual expenditure £20 ought and 6 pence, result misery."

For decades, governments and households alike have ignored the Micawber stricture and made a virtue of their debts and their prodigious spending.

But this year, the fear of sovereign debt defaults spread across Europe. Countries, staring election defeat and riots in the face, finally realised that like responsible households, they needed to live within their means.

Andrew Milligan, the head of global strategy at Standard Life Investments, says next year will be dominated around the world by the tension between the need for stimulus and the need for cuts to public spending. "A stark debate is taking place between the need for fiscal austerity to demonstrate credibility to markets and the need for stimulatory policy, fiscal and especially monetary, to boost growth," says Mr Milligan.

In the UK, the coalition government is standing firmly behind a plan to push through £81 billion (Dh458.15bn) of cuts, in the face of threats of a battle with trade unions.

George Osborne, the chancellor, has made it clear that it is all down to good housekeeping.

"If we don't take action, we will soon be spending more on servicing our debts than on educating our children," the British chancellor of the exchequer said this year.

The continuing euro zone crisis appears to endorse the coalition's strategy for putting the UK economy back on an even keel.

Credit rating agency downgrades in the past few days show Europe is by no means out of the woods, even though those nations most at risk have imposed tough medicine on their citizens.

In the past week, Moody's slashed its rating on Ireland's national debt by five notches and has warned it might yet downgrade Spanish and Portuguese government debt because of the grim prospects for economic growth in the two countries.

More than 4 million Spaniards - more than one in five people of working age - are unemployed, and few people believe the stagnant economy will enjoy a rapid recovery in the near future.

Willem Buiter, Citigroup's chief economist, warned this week that Greece, Ireland, Portugal and possibly Spain were likely to be forced to restructure their debts before 2013 to put their finances on to a more sustainable footing. Mr Buiter argued the region's response to date had been "woefully inadequate" and that it urgently needed to divert far more resources to keeping its debts under control.

The warnings came as Chen Deming, China's commerce minister, repeated the superpower's support for weak nations. China has cast itself as a saviour of cash-strapped euro zone countries and has diverted what is thought to be a large portion of its US$2.6 trillion (Dh9.55tn) stash of foreign exchange reserves into the single currency but has made clear its displeasure at the failure of the euro zone nations to get a grip on the problem.

So what of the year ahead? Analysts across the City of London are cautious, with many predicting that the euro zone countries are now entering a difficult phase - which continues to have implications for the UK's economy.

"The focus on sovereign risk that we saw two months ago is now shifting away from nations' liquidity crises to actual solvency itself," says Fumio Taki, an analyst at Daiwa Capital Markets.

Countries have no way to eliminate concern over possible default other than by showing sustained improvement in their public finances, a process likely to require a lot of time.

But is it even possible for all nations to live within their means?

It was not always this way. For much of the UK's history successive governments kept the budgets balanced, taking the nation into the red only in times of war and recession. There are still many countries that operate budget surpluses, such as Germany and Norway.

But while it may seem prudent right now for countries such as Ireland, Spain and even the UK to become more like Germany, not all countries can live within their means. Global current account balances must total zero. Surplus countries and deficit countries are mirror images of each other.

Over the years, British politicians, including the last Labour government, have argued that it is fine to borrow as long as that borrowing is used to invest in infrastructure and not to fund current spending, such as public-sector workers' salaries.

All fine in theory, but it was a pledge that was impossible to stick to in the face of the global recession and financial crisis.

The truth of the matter is that governments keep borrowing until markets or voters prevent them from doing so.

Meatless Days
Sara Suleri, with an introduction by Kamila Shamsie
​​​​​​​Penguin 

Tree of Hell

Starring: Raed Zeno, Hadi Awada, Dr Mohammad Abdalla

Director: Raed Zeno

Rating: 4/5

Moon Music

Artist: Coldplay

Label: Parlophone/Atlantic

Number of tracks: 10

Rating: 3/5

Understand What Black Is

The Last Poets

(Studio Rockers)

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Thank You for Banking with Us

Director: Laila Abbas

Starring: Yasmine Al Massri, Clara Khoury, Kamel El Basha, Ashraf Barhoum

Rating: 4/5

TOUCH RULES

Touch is derived from rugby league. Teams consist of up to 14 players with a maximum of six on the field at any time.

Teams can make as many substitutions as they want during the 40 minute matches.

Similar to rugby league, the attacking team has six attempts - or touches - before possession changes over.

A touch is any contact between the player with the ball and a defender, and must be with minimum force.

After a touch the player performs a “roll-ball” - similar to the play-the-ball in league - stepping over or rolling the ball between the feet.

At the roll-ball, the defenders have to retreat a minimum of five metres.

A touchdown is scored when an attacking player places the ball on or over the score-line.