UBS is warning that extreme budget cuts in the UK could lead to a pound crisis and even force the currency to near dollar parity, according to The Telegraph.
If policies to trim the budget go too far, UBS says that the pound could fall to $1.05 and below the value of the Euro. This would presumably be a reaction to whatever economic slowdown comes as a result of the cuts.
This will come as a strong rebuke of Conservative Party plans to tackle the UK deficit, which indicate sharp cuts across the board coupled with tax cuts to push job growth, according to The Telegraph.
The UK seems to be caught in a ‘Catch-22’ scenario: after all if they don’t cut the deficit, they may lose their credit rating.