European Union: Looking Back At 2010 - And Forward To 2011

It's traditional at the turn of the year to look back at the 12 months just gone and do some pondering. Was it a good year? Will the new one be any better? And what about those New Year resolutions – how long will they last this time?

For the last couple of years in the January edition of The Gibraltar Magazine, I have set out some thoughts on the previous year from a financial perspective – and my own view as to prospects for the next. I am a natural optimist (probably an essential requirement as I work in business development) so of course I am always of the view that the coming year just has to be better than the last. But how true is this likely to be for 2011?

Consider this summary: major banks rescued; currencies under pressure; interest rates at rock bottom but bank lending still difficult; and property prices plummeting in certain countries. Sound familiar? I wrote a piece along these lines a year ago when looking back at 2009. Put another way, at first glance not much has changed in the last 12 months. But look a little more closely and in certain countries things are markedly different. Let us examine just a couple of examples close to home in the European Union.

I always find it's best to consider the UK first in any review because, here in Gibraltar, we are affected in so many ways by the state of the British economy. Although the government here manages our financial affairs, questions such as the setting of interest rates and of course the vital matter of the exchange rate – of particular importance here is the pound's value against the euro – are totally beyond our control.

In May 2010, the UK general election resulted in a hung parliament and the UK entered a new era of coalition government. The most pressing issue during the election campaign was the truly dreadful economic situation. Once in power, an emergency budget resulted in higher taxes overall and reduced government spending across the board in an effort to reduce the budget deficit.

Without wanting to stray into UK politics, the harsh medicine seems to be having a positive effect overall. Borrowing is steadying and the markets seem to have calmed down a bit. In September, the International Monetary Fund announced that in their opinion the UK economy was on the mend. We are still however in uncharted waters and any new economic waves could still prove dangerous because stability remains fragile.

High profile international events such as the royal wedding in 2011, the London Olympics and HM The Queen's Diamond Jubilee in 2012 are going to attract vast international coverage. Whilst the events themselves will generate huge revenue in their own right, the authorities will also be keen to showcase Britain as a country that has truly turned the economic corner.

How different the economic outlook appears across the Irish Sea as this New Year begins. Formerly known as the Celtic Tiger with a booming economy and Asian-style rates of growth, the situation in Ireland suddenly lurched from serous to critical. Last year saw a marked deterioration when the full extent of the cost of bailing out the Irish banks became apparent. The result was that the annual budget deficit for the year was estimated to be close to 32% of GDP – ten times the normal permitted maximum level.

Eventually, in November, the EU was forced to "recommend" that Ireland sought external assistance. Not only is this type of scenario bad for the country itself, there is also the very real danger that the contagion may spread further into the eurozone. This is why the EU put pressure on Ireland to seek assistance from the financial bailout mechanism agreed earlier in the year.

In Spain it has been a familiar story with another year of stubbornly high unemployment – officially recorded at around 20%. Anecdotal evidence suggests that in some places the real figure is substantially higher – particularly in the 18 to 24-years–old age bracket. As elsewhere in Europe, VAT was increased in the austerity budget and in May the government had to step in to rescue CajaSur, a savings bank crippled by property loan defaults.

Further afield, Greece was the highest profile casualty of the economic crisis during 2010. In May, she was eventually forced to accept a bailout of €110 billion from the EU and IMF. The road to recovery will be a very long and difficult one for the Greeks.

Looking at the currency markets, the euro appeared to be holding its own during the year. This is mainly due to the relative weakness of other major currencies such as the pound and US dollar. Of course, here in Gibraltar we are chiefly concerned with the pound / euro exchange rate. After rising nicely through the summer we saw a fall-off as autumn approached. There are many factors affecting the currency so it is difficult to predict where the rate goes from here.

Interest rates have remained at historically low levels all year and this seems likely to continue for some time to come. During 2010 there was modest tightening in some countries such as China and Australia – where interest rates were raised. Across Europe including the UK and in the United States, the danger is that raising rates too quickly might stifle the fragile recovery process. This is of course the last thing that any of the economies need.

The other half of this equation is inflation and once again, we continue to live in a period of relatively low inflation overall. However, the steady rise in the price of a barrel of oil has certainly made itself felt as much higher utility prices have been seen across Europe.

So what would I predict for 2011? As always, I must add an important "health warning" here. These are only my personal thoughts and with so many factors at stake, my predictions could prove to be very wide of the mark.

It seems reasonable to assume that in the absence of any major new financial shocks – and at the time of writing the whole euro zone project seems to be under threat – a gradual recovery will continue in many economies across Europe and around the world. There are some countries that will experience a slower recovery or worse – just consider, for instance, how much ground Ireland and Greece will have to make up – and there may be increasing public unrest as austerity measures really begin to bite.

For most of us, I suspect that 2011 will be another year in which we will have to continue to rebuild our fitness after the injuries of the recent past. Depending on your point of view, higher interest rates would be welcomed by savers – but not by mortgage holders. We may see some tightening later in the year but the general consensus appears to be for a continued period of very low rates. As for the exchange rate, most forecasters seem to be looking at fairly flat conditions at least for the first half of 2011. I am not brave enough to commit myself in writing but I will be watching developments across Europe for clues as to how sterling will fare in the next few months.

At this time last year, I wrote that the only thing I could confidently predict was that the warm spring sunshine shouldn't be too far away. Twelve months on, I think this remains the only thing of which I can be relatively certain, such is the fragile nature of the international economic scene. Let's hope that this winter is relatively mild and short-lived.

So there we have it. Yes 2010 was similar to the year before. On balance, neither came anywhere near the horrific experiences in 2008 – but the recovery is still limping rather than charging ahead. Overall I believe that 2011 will prove to be a similar.

It only remains for me to wish all readers and their families a very Happy New Year. Let us hope it is prosperous, peaceful and happy for all of us. If you are making financial resolutions this year, good luck with keeping them going!

Happy New Year.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.