What if the UK lost the confidence of the markets and was forced to turn to the International Monetary Fund, as in 1976? Even as Liz Truss took over as leader of the Conservative Party on Monday, September 5, becoming the prime minister of the British government, the hypothesis began to be debated in the City, according to Le Mondequoted by Rador.

“(This assumption) may seem far-fetched, but it is not an unprecedented situation: a combination of aggressive budget spending, a major energy shock and a sharp fall in sterling necessitated an IMF bailout in the 1970s,” recalls Shreyas Gopal, an analyst at Deutsche Bank, in in a note published on Monday.

For now, that assumption remains unlikely: “Britain retains several lines of defense against a sudden shutdown [a pieței financiare]. But the analyst warns that the risks are becoming more and more obvious.

A large current account deficit

A tempting parallel with the 1970s. The pound is at its lowest level against the dollar since 1985 at 1.15.

Britain may already be in recession, with its gross domestic product falling by 0.1% in the second quarter and the gas crisis affecting the whole of Europe having worsened since then. The British are experiencing a strong shock due to the fall in purchasing power.

Inflation is 10%, and by October, household gas and electricity bills will almost triple compared to last year.

But above all, the UK faced a terrifying widening of the current account deficit (the sum of the trade balance and financial flows to and from the country), which reached an all-time high of 8% of GDP in the first quarter. In other words, the country has never been so dependent on the rest of the world for funding.

Even Rishi Sunak, Ms Truss’ rival for the Conservative leadership, raised the possibility of a dark scenario.

“It would be irresponsible not to take the risks of the UK debt crisis seriously,” he told the Financial Times on August 30.

Of course, the UK economy is not the only one affected by the gas shock. “All of Europe is sick, it’s true,” admits Torsten Bell, director of the Resolution Foundation think tank. “But the problem is that Britain was already sicker than other countries before the war in Ukraine.”

Bell worries about the combination of fifteen years of weak economic growth and widening inequality: “Together, these two challenges are toxic to the economic outlook.”

Even if they don’t say it outright, Liz Truss’ team partially shares this sentiment. “The same old management approach has left us with a stagnant economy and anemic growth,” Kwasi Kwarteng, the favorite to be finance minister, told the Financial Times.

That’s why he plans to roll out a massive tax cut plan to boost growth. But such an approach can be expensive: British newspapers are talking about 100 billion pounds (115 billion euros).

Returning to the original question: can the UK borrow such sums? Le Monde (Rador takeover)