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It's been the perfect antidote to recession.

While champagne sales fell flat - the fizz taken out by not much to celebrate and less money with which to do so - Scotch whisky continued growing its role as the status drink for the aspirational middle classes in emerging markets.

Come the recession, and whisky has the advantage of being something you can re-cork and drink more slowly, while being a tipple that accompanies misery and downturn as much as the toasting of success.

So it's had a fantastic decade, its sales even growing by volume and value through 2009.

It has also made headway in the industry's battle to break down extensive trade barriers into those emerging markets.

But being the quintessential Scottish product, the silver lining has a cloud attached.

Eyeing up

And the cloud in this case includes the harsh economic downturns in Spain and Greece, where whisky sales have been doing particularly well.

The industry is much more concerned, however, at the health concerns around alcohol - and not only in binge drinking Britain, but around the world.

It has campaigned ferociously against the Scottish government's plans for minimum pricing on alcohol, arguing that could undermine the Scotch Whisky Association (SWA) battle to fight on level taxation ground in its target export markets.

And now the UK government is eyeing up alcohol tax for review.

George Osborne has to raise revenue as well as clobbering binge drinking, so the SWA's formidable lobbying power is now being turned once more on the Treasury.

While stressing its responsible drinking credentials, that helps explain the research it's commissioned, and published today, showing just how big and important whisky is for the .

And if Verso Economics is to be believed, it is an impressive tale - in spending power, boosting Scottish demand through its supply chain, and exports.

Be careful how it uses those figures, however.

Boom years

When it says it employs as many people as Scotland's universities, it looks like it's using its direct and indirect numbers to compare with direct higher education employment.

And when the SWA highlights its employment figures, and its extremely high value added-per-worker, there's another way of looking at those figures.

That's because employment has actually fallen through the boom years.

Even before the Johnnie Walker plant in Kilmarnock was told it was closing, and other recession-rattled bottling plants shed workers in the name of efficiency, the survey shows a reduction of 1,300 direct employees of SWA members between 2000 and 2008 -a 12% fall to 9,800.

Fewer than 800 people work for non-SWA distillers.

So the fact it produces 12 times more value added per worker than the tourism industry appears to be something to be celebrated, in that it shows the productivity and success of the industry.

But it also raises the question of whether the benefit to Scotland of this highly profitable industry, with most of its ownership based elsewhere, makes for a dram as complex in its mellow magnificence as the industry has presented it.

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• - What's this?

A bank holiday weekend is already under way for many, and with petrol prices eased a bit, many will be taking to the roads to enjoy the best of Scottish scenery.

A poll of best drives in The Scotsman today sparked a torrent of texts to Radio Scotland's Good Morning Scotland programme on the nation's most scenic journeys.

But most descriptions were along the lines of the A-such-and-such, between Achnashuggle and Inverscunnert, which sort of misses the point of great scenic drives - they shouldn't be defined by their bureaucratic number or the starting and end-points, but by the journey itself.

So here's a memo to the Great Chieftains of our tourism marketing
efforts: why not brand the best of these drives?

Yes, there are sign-posts to meandering coastal tourist routes, and efforts such as the Whisky Trail. But there's got to be more potential. And it needn't be just for the honey-pot journeys with mountains and lochs.

Some years ago, I drove Route 50 across Nevada, a desolate desert journey once galloped by the Pony Express and marketed since 1986 as "".

There were near-deserted mining towns every hundred miles or so, where you could have a certificate stamped at the drug store as proof that you had, indeed, conquered The Loneliest Road.

There's a clue to one benefit of this approach: you have to stop and visit the drug store.

So why not signpost visitors to some great Scottish routes, in league with tourist attractions and businesses along the way, through historic urban Scotland as well as rural Highland splendour.

Along the A82 road from Fort William to Inverness, for instance, my suggestion is the marketing slogan: "The Great Glen - it's Scotland's Fault".

The Road South

Fault is also being found by Independent Financial Advisers, incensed that inspectors from the Financial Services Authority are travelling all the way from its Edinburgh office to poke their regulatory snouts into their business in England.

In one case cited by Money Marketing, the , Scots-based inspectors visited a company an hour's train journey away from the FSA office at Canary Wharf in London. In another, Scots-based regulators were spotted as far from their bases as Plymouth.

This is seen as a sign of FSA profligacy, expecting the hard-pressed regulated to stump up the costs of trains and hotels for the regulators.

The spleen will be further vented by news out this morning that the FSA budget is rising by nearly 10%, though it's trying to load the consequent costs onto the firms that need the most regulatory attention.

However, blaming Scots-based staff makes you wonder how good these Independent Financial Advisers are with finances.

If they can't see that it's a more efficient use of resource not to employ expensive staff in expensive offices in London, hiring instead in Scotland where there is financial expertise - and yes, even if these people occasionally have to travel to clients - then what hope is there that they'll be able to calculate the best pension for you?

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• - What's this?

It's not just the Gulf of Mexico that has oil spill problems. A major incident is under way 120 miles east of Shetland, in Norwegian waters.

No spill yet, but there's been a risk for nearly a week in developments officially classified by the country's offshore safety authority as "serious".

A large platform has had 89 workers evacuated, while operator Statoil and its remaining staff struggle to get the well under control.

The problem at the Gullfaks C platform comes from the unpredictable behaviour of gas below the sea-bed.

That's in contrast with the BP oil spill off the Gulf coast of the southern United States, where well pressure has been a key problem, but at least as important has been the much greater depth of water, creating intense pressure on the equipment.

Drilling 'mud'

Under the Norwegian platform, the BOP, or blow-out preventer, is acting as a barrier if the pressure continues to build. But the other barrier, drilling 'mud', has not proved effective in containing the Gullfaks well.

That may have changed on Wednesday morning. Statoil, Norways' state-owned oil company, has been pumping drilling mud into the well since the incident began, in an attempt to reach a point where it caps the pressure.

A spokesman for Statoil, Gisle Johansen, said today that the point has been reached where "loss of mud into the formation has stopped and we do not have to pump additional mud into the well. This is positive information and tells us that the pressure situation in the well is more stable".

However, he said: "We still don't have the necessary safety barriers in place".

The next stage is to cement a plug into the well, said the spokesman. That work has yet to start, and will take several days.

Meanwhile, Statoil has been keen to play down the risk of a blow-out and major leak of oil and gas, saying the chances are "very small".

Trade unions

If it is found that the depth of water and the pressure in the Gulf of Mexico spill has been the main factor in the spill there, then it can leave much of the North Sea industry relieved.

But the offshore industry worldwide is preparing for increased scrutiny. A new Oil Spill Prevention and Response Advisory Group has this week been set up within the UK industry. Including industry, regulators and trade unions, it's chaired by Mark McAllister, chief executive of Fairfield Energy.

He's pointed out there hasn't been a blow-out in the North Sea for more than 20 years, but "in light of the recent Gulf of Mexico incident, it is only right that we take a fresh look at our practices in the UK".

That includes the first response to protect workers, the equipment necessary for stockpiling, and questions of insurance cover.

The next frontier in UK waters is west of Shetland, where much deeper waters present a tougher technical challenge.

And with the US having stopped - at least temporarily - new drilling off its shores, there are now competing pressures on the industry.

If and where offshore drilling is allowed, the experience of the Gulf of Mexico spill is expected to push up the safety requirements, and not just under American waters. That increases costs, and may make some wells uneconomic.

But the demand for greater safeguards also presents a combined technical challenge and a big business opportunity for those with established subsea engineering expertise.

And north-east Scotland's got lots of that.

I'm told Aberdeen's finest are already at work on solving BP's nightmare down on the Louisiana bayou.

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• - What's this?

Three weeks ago, Gordon Brown (remember him?) was making a spirited election campaign pitch against the imposition of £6bn of cuts to the UK government's budget this year.

It would risk a double dip back into recession, warned the then Labour leader.

Both Mr Brown and that argument have been overtaken - not just by events but by a stampede of European governments rushing to slash their budgets and placate the markets.

Greece had to take the medicine first, being the worst offender. Those so-called PIGS, including Portugal, Ireland, Italy, Greece and Spain - were warned of contagion spreading along the Mediterranean and up Europe's Atlantic coast.

The British budget deficit is running as high as Greece's, but it has the safety valve of its own currency. That should help, yet it offers limited protection against the contagion as investors lose confidence in the ability of Europe's big borrowers and debtors to pay back their loans.

The £6.2bn in-year cuts announced on Monday by the new Chancellor, George Osborne, were taken in the markets' stride - something to be expected, rather than a threat to economic recovery.

Italy and Spain cut

By today, the markets moved on. The latest bout of selling on the London Stock Exchange focussed on Britain's banks, with Lloyds, Barclays and Royal Bank of Scotland registering sharp falls. The FTSE fell 2.5% during Tuesday.

Market fears about Europe's economies have been worsened first by an IMF warning to Spain to move swiftly on its deficit and its structural blockages, and then by the concerns that Spain has had to shore up its banking sector, with mergers and government capital. Santander was a big faller on the Madrid stock market, and fears there could affect its appetite for buying the large chunk of RBS that's for sale in Britain.

The Madrid government is cutting civil service pay by 5%, and that of members of the parliament by 10%.

The Italian government's cabinet meets on Tuesday evening, to decide on a big cut to its deficit, despite it being nothing like as big as others. At 5.3% of GDP, it's below the European average and particuarly modest by British or Greek comparison.

But Italy's debt, at 115% of GDP, is much higher than the rest of Europe, even if it is funded mainly by Italian investors. According to a government spokesman, Italians face "very heavy sacrifices".

(A reminder, if you need it, and as I'm asked this from time to time: if you're running a deficit, it's the amount you spend each year in excess of the amount you earn, whereas the debt is the pile of deficits that mount up over time.)

Deutsche demand down

What's new is that the wielding of budget axes has spread to the parts of Europe that looked relatively sound. Denmark, with its own currency pegged to the euro, is cutting unemployment and family welfare benefits, plus some tax breaks and government ministers' pay.

Although it's one of those driving the European economic motor, France has announced a freeze in public spending for three years, and it's mulling an increase in its retirement age, returning it from 60 to 65.

Perhaps the most telling convert to budget austerity is Germany. With a deficit above 5% and eager to get down to the 3% limit it is demanding of others, the Berlin government aims to cut its federal budget by £9bn per year for three years, also including a rise in the retirement age.

That is intended to set other Europeans a good example. But the worry for other parts of Europe is that Germany has the economy on which others were depending to keep demand buoyant.

That is: while governments rein in spending, and reduce demand for goods and services within their own economies, most of them look to exports to pick up the slack. But if government demand is being cut across your key export markets, well, where is the demand going to come from?

Oil slides

So the financial markets are being spooked by a paradox: they fear default on sovereign debt, so government deficits have to be cut sharply, but they fear those cuts will return Europe's economies to recession.

The commodities markets provide indicators of the latter concern. The falling oil price - down by 22% in three weeks, and sharply on Tuesday - reflects a fear that demand for raw materials and fuel is about to dip again.

And if you look at the price of gold and the strengthening dollar, you can see where many investors are going for refuge.

It's not all panic and gloom. Data today from the US, including American consumer confidence, suggests the recovery there looks a tad more assured.

But what if international investors switch their attention to America's 10% budget deficit - this year expected to reach $1.5 trillion, or more than a thousand million pounds, and question how long before that has to be choked off.

Lessons for Scotland

A final note from a Scottish perspective, and for those who see today's Queen's Speech at Westminster as ushering in a major shift in taxation and borrowing powers at Holyrood...

In paring back government borrowing in Spain, one of the most difficult issues is negotiating across a range of devolved administrations with different taxation powers, but without the debt liabilities that are the focus of the Madrid government's attentions.

And in cutting back in Italy, one of the problems is that regional and local governments have taken on their own debts. According to the Bank of Italy, they owe 100bn euros, either to central government or their own bond-holders.

The challenge for the Scottish government and the Treasury in London is to devise a system that avoids that risk of undermining Britain's debt position even more than it's already compromised, while giving Scotland meaningful taxation and borrowing autonomy.

The lessons from other European countries in the current "fiscal consolidation" do not make that balance look an easy one to strike.

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• - What's this?

Here's the figure to cause an audible gulp among MSPs at Holyrood: £332,466,000.

That's the amount as a result of today's spending cuts for Whitehall.

That's before the SNP's finance minister implements the cuts that will be required of him in next year's budget, which are near certain to be far greater.

According to John McLaren, who has taken a leading role in analysing this at Glasgow University's Centre for Public Policy for Regions, the combined effect of the deferred cut, plus the end of a pot of savings kept back from previous years, plus the first tranche of three really big annual cuts, means that Holyrood's spending cuts next spring will be around 5 to 6%.

Indeed, the next few years will are set to see spending reductions of around 10 times the amount announced today.

Olympic largesse

The announcement from the Chancellor, George Osborne, and the LibDem Chief Secretary, David Laws, included a £704m cut for "the devolved administrations".

The three First Ministers are currently meeting at Stormont in Northern Ireland to discuss some of the issues around that, including their claim for some of the Olympic 2012 largesse being visited on the regeneration of east London.

Wales is facing a net cut this year of £168m, and it hasn't yet been decided if it will accept the offer of a deferral.

For Northern Ireland, the consequences of applying the Barnet Formula to its spending grant mean a cut of £128m.

The Scottish calculation comes from sharp cuts to Whitehall budgets that will reduce universities spending (already hit in the most recent Labour budget) and the regional development authorities.

These roughly mirror the role played by Scottish Enterprise, which itself has been through a sharp budget cut in the past three years.

Transport is also taking a very large hit, with knock-on consequences for those devolved budgets - though, as with business, it is up to the parliament and assemblies to decide if those are the same departments that will take the hit outside England.

£1 in every £100

What cushions Scotland, Wales and Northern Ireland is that there is a ring-fencing of most health, schools and young children's centre (Sure Start) spending.

As they make up a large part of the devolved responsibilities, that ring-fencing reduces the impact of the cuts.

The other cushion is that there are a few areas of increased spending for England, including a boost to apprenticeships and more for capital spend on further education spending.

Scotland's share of that extra spending will be £42m.

So once £375m has been cut off this year's budget, £42m has been added on, leaving the total cut just above £332m.

That's roughly £1 in £100, which is what the Conservatives said it would be during the election campaign.

David Cameron and George Osborne said that if any household can cut back on £1 in 100, then so can the government.

Ministers to standard class

Of course, it's a bit trickier than the family not going out for a pizza once every second month.

There are those unintended consequences of making sudden cuts: for instance, cutting the wrong thing to hit a spending target this year, but at the expense of investment that would deliver longer-term savings.

And there's the argument - deployed by the Scottish government - that cutting public spending now will pitch us back into recession, because the private sector is not yet strong enough to pick up the slack from reduced government spend.

One of the ways that happens is with private firms that depend on government contracts.

If you're in IT, or a consultant to the government - including the Big Four accountancy firms - then the cuts being implemented this year and over the next four years looks likely to create a big hole in your business plan.

Likewise advertising companies, and spare a thought for the poor train operators without the first class purchasing power of all those ministerial travel budgets.

What, then, does today's announcement leave George Osborne to announce in his emergency budget on 22 June?

He's already unleashed his spending cuts.

What's left is the economic forecast, as supplied by the new Office of Budget Responsibility, and shorn of any lingering over-optimistic assumptions.

There are also tax changes to be announced - maybe not for this year.

They'll start with a rise in the basic rate income tax threshold, and increases in employees' national insurance contributions.

I would expect to see some reviews set up, just as Gordon Brown used to do as Chancellor.

Capital gains tax is already set for a hike, though that will need a lot of political cover.

And June would be an opportune moment to start softening us up for future increases in VAT.

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• - What's this?

Are Scotland's public sector workers overpaid?

It's a provocative question, but it really matters - because if they are, they're taking very scarce resources away from services on which the axe may be about to fall.

That's the conclusion of one of Scotland's leading economists, who happens also to be adviser to the economy committee of the Scottish Parliament.

Professor David Bell of Stirling University has , to help guide decision-making when it comes to distributing resources at a time of unprecedented cuts.

For the highly-qualified, he concludes, they are paid relatively well - relative, that is, to both the nation's gross domestic product and similar professionals in other countries.

Doctors' pay

General practitioners stand out as the big winners of the last 10 years.

No surprise there, of course.

We know they got a very good pay rise, while reducing their out-of-hours on-call requirements.

The result is that GPs are better paid, relative to national income, than family doctors in any comparable country.

That goes for Scotland and the rest of the UK, as the pay deal was the same across borders.

And while hospital consultants got a good deal out of both UK and Scottish governments, that put them in mid-range by international comparison.

In education, the study shows primary teachers in Scotland do very well compared with their counterparts in other countries.

In a study of 30 developed countries, it is only primary teachers in South Korea, Germany, Portugal and Japan who do better than Scotland's.

England is closer to mid-league.

Staffroom harmony

There's a story behind this of relative generosity to public sector professionals over the good years.

It has kept doctors happy and bought staffroom harmony.

There are those who wonder why the money wasn't used to achieve more than that.

The generosity to doctors and teachers is demonstrated by a look at the way the pay bill has risen in the health service by an annual average of 6.3% between 2004-05 and 2008-09.

The school wage bill went up, in the average year, by 3.4% over the same period - though the big increases that followed the so-called McCrone deal came earlier in the decade.

Health and education payroll costs account for not far off a third of Holyrood's entire budget, and the total pay bill for more than half, so it matters that that money is being effectively and efficiently spent. (Bear in mind that the increases can be at least partly explained by an increase in staffing numbers.)

Bargaining power

Professor Bell offers one (perhaps the only quantifiable) measure of whether that's being achieved: how does someone with similar qualifications fare in the private sector?

The answer is that those with a higher degree in Scotland's public sector earn 7% more than those with higher degrees in the private sector.

It's not all largesse to those in the public sector, however.

Those with a trade apprenticeship earn 10% less in the public sector in Scotland than in the private sector.

You'll note those are the people with the least bargaining power.

This may look like inefficient distribution of scarce resources, but it could be worse.

In Ireland, the public sector premium over private sector pay grew from 14% in 2003 to peak at 26% in 2006.

That helps explain why Ireland has had to cut public sector pay to help cut its deficit, with the higher earnings taking the bigger percentage cuts.

But when compared with the rest of the UK, there is a striking difference.

Using the UK Labour Force Survey between 2005 and 2009, public sector workers earned less than private sector at every level of earnings.

This gap has been widest among the more qualified groups.

But in contrast, in Scotland, those with a further education qualification, or higher than that, would be better off in the public than the private sector.

Those whose educational pinnacle was a clutch of Standard-grades can expect to be 4% better off in the public sector, but those with no qualification can expect to be 5% worse off, on average.

Irish go-slow

So if there's a Scottish public sector pay premium, is it time for Irish-style pay cuts to help close the vast government budget deficit?

Professor Bell argues, on one hand, that that would raise obvious industrial relations problems.

(While the Irish have not protested the way the Greeks have, their civil servants have responded to the demotivating effect of pay cuts by go-slows - don't expect to get your passport application, for instance, to be handled with much despatch.)

General cuts interfere with the ability to reward productivity or to differentiate locally or regionally.

On the other hand, they can be differentiated in a progressive way, as in Ireland, with larger cuts going to bigger earners.

And they send a signal about the gravity of budget problems.

Whether the new Downing Street cabinet sent a sufficiently strong signal with its 5% pay cut is open to dispute.

It may have to go further if it is to persuade workers that the bosses are taking their share of the pain, as fairness will have to be a guiding principle of making this workable.

Professor Bell has gone further with to Scotland's public services.

It could save just over £1bn, he reckons, which is only around a third of the savings that would be necessary over the next three years.

He points out it could be much easier to freeze pay while the retail price index inflation rate runs at more than 5%.

That would be an effective, real terms pay cut, but is unlikely to run into the same opposition.

And it's what much of the private sector has been through already, albeit with lower inflation in the past two years.

Private firms' employees have often been willing to recognise the trade-offs between a pay cut now and having a job next year, and between taking a general pay cut rather than some being made redundant.

Layers of managers

Another expert offering advice on workability of implementing cuts - ahead of George Osborne's announcement on Monday of £6bn of cuts in the current financial year - is Deloitte's public sector team in Scotland.

Angela Mitchell's perspective doesn't make it sound easy, which may be because it's not.

She warns of the unintended consequences of spending reductions in one area leading to increases in another.

The obvious examples are of redundancies leading to increased unemployment benefit, or of IT project cuts leading to increased inefficiency and costs down the road.

Deloitte's free advice: if you want to protect frontline services, look at the number of layers in organisations, especially management layers, the number of people reporting to managers, the number of people whose job it is to monitor what other people are doing and the number of people doing things that are not critical to their organisations.

That's where you find overlaps, and savings can be made.

Money insight

But one manager who may require a bit more involvement is the director of finance.

According to another of the accounting Big Four, PricewaterhouseCoopers, a survey of the money chiefs in the public sector found they'll have to up their game in the tough times about to hit them.

Only a fifth of those responding to PwC's survey of finance directors (60 people surveyed across the public sector, so it's not the biggest of samples) said their role is as a 'business partner'.

Their time is skewed to compliance and control, rather than strategic planning or what they prefer to call "insight activities".

That has taken only around a fifth of their time.

And while they told the previous survey they hoped to double that element of their work, the reality has been a move backwards.

Only 5% said strategy and planning within finance offices has been "high performing" - yet that's the bit that's going to have to perform exceptionally well in the coming months and years.

* To hear more about how the looming spending cuts can be handled, watch The Politics Show Scotland, on Sunday 23 May at 12.00 on ³ÉÈË¿ìÊÖ1 Scotland.

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• - What's this?

Britain's biggest retailer has been listening to its customers, and a clear majority are concerned about Britain's big bad booze habit.

So Tesco has joined the Scottish government in support of either an end to selling below wholesale cost price or perhaps a minimum pricing of alcohol. This breaks ranks with the other big retailers, and no doubt infuriates the distillers and most brewers who have been fighting the move.

It's a big gesture in the direction of taking responsibility for health and community safety, isn't it?

Well, there may be more to it than that.

A big retailer such as Tesco buys its booze at wholesale prices, of course, and these are, as you'd expect, lower than the retail price.
That's unless they're loss leaders, used to draw people in to buy other goods at a profit.

There's no plan to increase the wholesale price being paid.

So if there is to be no more loss leading, or if a minimum price per unit of alcohol is to be imposed, then the retail price will rise.
The difference between the current retail price and the future retail price looks like clear profit for the retailer.

You'll notice that Tesco doesn't seem to be so keen on raising tax, which would be the other way of using higher prices to reduce consumption. And with George Osborne looking at a gigantic government deficit, alcohol tax is unlikely to escape the Chancellor's attention.

So call me cynical, but perhaps it's no wonder Tesco has discovered its social conscience and listened to its customers.

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• - What's this?

A billion pound dip in revenue, allied to a billion pound dip in costs, leaving a pre-tax loss of £531m - British Airways is on one of those rollercoaster rides where it's not clear if the track has an upswing.

The loss may not be as bad as dire expectations, but it's still a huge hole in its finances.

Cabin crew strikes past and planned for the next few weeks are expected to cost it more than £100m in lost revenue and leasing of planes with crews from outside BA.

It's harder, for now, to quantify the impact on customer loyalty as they go to other check-in desks for less hassle and unpredictability.

The pay freeze and smaller crews - the proposals that sparked the strike - were intended to save more than £60m per year, though concessions already agreed may bring those savings down.

It's clearly making a calculation that strike losses and reputational damage combine into a price worth paying to break the power of its cabin crew staff union.

Going to hurt

But the scale of BA's operations and the scale of its other problems show the strike is a relatively small headache.

Volcanic ash has harmed it much more than its rivals. Passenger numbers in April were down 24%, while rival Ryanair limited that to 8%.

BA's just been hit by the new government at Westminster reversing the decision to allow a third runway at Heathrow.

And the coalition agreement has also shifted from a passenger-based air tax to one that's levied on each plane taking off.

For an airline that flies with significantly fewer passengers per plane than its rivals (79% of capacity last year, and much of each plane taken up with premium passengers enjoying that extra leg and elbow room), the tax change is going to hurt.

The upside - if there is one on this rollercoaster - is that British Airways hopes to be well-placed, growing out of the downturn, to be a major global player in the premium passenger, long-haul market.

Old model

Its merger with Iberia is intended to bring £360m cost saving synergies after five years, and it hopes for an alliance with American Airlines on trans-Atlantic routes, if the regulators allow it.

That would help compete with United and Continental, which are joining forces as the big airlines consolidate.

With a dominant position at Heathrow - even if its operations are constrained by the runway decision - BA has a prime position in international travel.

But it has to watch its back.

As chief executive Willie Walsh learned while at Aer Lingus, the old model is broken and it is airlines such as Ryanair that have created a new one.

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• - What's this?

It's been a cold winter, and it lasted a long time. But have you noticed how little wind and rain there has been?

Scottish and Southern Energy noticed. Its annual figures, published on Wednesday, showed power generation from renewable sources, primarily wind and hydro, had fallen 10% below expectations.

It's a reminder of the unpredictability of those power sources. But it hasn't cooled the energy of Ian Marchant, chief executive of the Perth-based company which counts as Britain's second power utility.

With profits topping £1.31bn, the sector's critics focussed on the sharp increases in customer prices over recent years. U-Switch issued a reminder that companies that blame forward commitments for the stickiness of prices downwards should be equally sticky if energy prices rise.

Saudi Arabia of renewables

SSE isn't in much doubt about the direction of power prices. Its annual figures tell the story with the extraordinary breadth of its activity to replace ageing generating capacity, at the same time as meeting the hugely demanding aspiration of moving from carbon-intensive power to renewables.

The scale of that has been underlined by the activity in Aberdeen this week as the renewables sector confers in the All Energy gathering. To mark the occasion, an industry-government assessment has set out the potential Britain has in the next 40 years, and it's even bigger than the Saudi Arabia of renewables that we've heard about.

The 'full practical resource' of Britain's wind and water resource comes to six-times its current level of electricity demand. The most ambitious scenario suggests harnessing 76% of that resource, at a cost of nearly £1 trillion - or £993 bn, to be more precise.

Just to meet Britain's current targets by 2025, rather than its potential by 2025, Ernst & Young has calculated that the total capital requirement would be nearly £200bn.

Loch Ness hydro

The scale of that challenge raises big questions about the capital constraints, and if the banks are up to the task in their current state. And if this is the bonanza that's going to be the next phase of British economic growth, are there elements of capital constraint that could result in other sectors?

SSE seems to get on well with its lenders. Through two years of credit crunch, it has negotiated £4.6bn in new and continuing finance.

This is backed by rapid expansion. The number of customers has doubled in eight years to 9.3 million. Generating capacity almost doubled in six years to 11.3 gigawatts.

Some of that finance is to upgrade its existing assets, with Scotland's hydro infrastructure hitting the age when the rest of us could expect to retire.

There are two new hydro schemes planned above Loch Lochy and Loch Ness, and the Glendoe tunnel near Loch Ness requires a new tunnel to get round the rock fall that knocked it out within months of starting its flow.

Grid links

A new gas generating plant has just been opened near Southampton, the first in Britain for five years. There's a stake in nuclear developments, but without taking the lead.

Its efforts at carbon capture and storage continues, with the focus on an industrial-scale trial in Yorkshire.

Grid upgrades include a stake in the controversial Beauly-Denny pylons marching through the Highlands, but also plans for sub-sea links with Shetland and Lewis. A bid is still being prepared for the English grid connections being offloaded by EDF, though it seems there are problems with the reliability of the current £4bn-plus system.

The past year has seen £666m of investment in renewables, with lots more to come through SSE's stake in the next generation of offshore wind farms.

The reach of the utility comes downstream to domestic metering. Alyth in Perthshire was one of three pilot communities in Britain set the target of cutting its energy use by 10%. It hit it. The company is working with other communities and businesses wanting to invest in their own wind turbines and renewables.

A new housing development in Slough is intended to be carbon neutral, with SSE showing if and how the same can be achieved more widely, as building standards get tougher.

Electric cars

The perverse end of this is that customers are not only using less of the company's wares, but the company is being told that trend has to continue. It reckons electricity generation among its domestic customers is down 6% and gas use is down 8%, saving the average customer £70 last year. The drive to cut use goes on, with improved insulation and rising prices helping subdue demand.

Coming down the highway is another huge increase in demand, if transport is to lose its dependence on fossil fuels. Electric cars will be plugging into the grid in significant numbers within the next 10 years - one estimate suggests 1.5 million, or around one in 15 - and that's going to require a huge lift in the generating capacity to provide for them.

SSE is in two of nine pilots to see how that works, one of them with Strathclyde University, the other with BMW in making electric Minis and providing the hardware necessary to plug them in and keep them going.

The company is, probably, the most diversified of utilities in Britain. But as it's one of the smaller power companies operating across Europe, it's worth remembering that all this transition within the energy market has global dimensions.

There are plenty pressures crowding in on the new administration at Westminster, but getting the framework right for this energy revolution has got to be one of the biggest and most daunting ones.

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A little bit of history: Remember 10 or so years ago, when Silicon Glen was shedding thousands upon thousands of jobs?

We were told then that the market in silicon chips - including DRAMs, or dynamic random access memory - was flooded due to over-capacity.

Gigantic chip manufacturing plants were closed down across Britain, or never opened, and production was focused on countries with cheaper wages.

With around 60,000 jobs in electronics, and £11bn in exports, Scotland then made nearly a third of Europe's computers and laptops, while chip manufacturing was also a big employer in England.

What we've learned today is that there were darker forces at work. The European Commission has just slapped a fine of nearly a third of a billion euros (more than £300m) on 10 companies that were operating a cartel.

This was at precisely the time that Silicon Glen had a major malfunction, taking all those thousands of jobs with it.

NEC and Mitsubishi were among the companies that also had a significant manufacturing presence in Scotland at that time.

The others included market leader Samsung, and Infineon, Toshiba, Hitachi, Hynix, Nanya and Elpida, while Micron was part of the cartel but escaped a fine by fessing up on the details.

Those details show the cartel was in operation between July 1998 and June 2002.

It involved a network of contacts and sharing of secret information, mostly on a bilateral basis, through which they co-ordinated the price levels and quotations for DRAMs sold to major PC or server original equipment manufacturers (OEMs) in the European Economic Area.

That isn't to prove that Silicon Glen could have survived as it was. But it shows the problems it faced were not just down to the hidden hand of the market.

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In Brussels - where the European train keeps rolling along, only pausing briefly to note the changing of the political guard at Buckingham Palace on Tuesday.

It may provide the first tricky challenge for the new government, as early as next week.0

While William Hague, as Foreign Secretary, wants to send a message about his atlanticist outlook by going to Washington first, the new Chancellor, George Osborne, has an appointment in Brussels with other finance ministers.

And I'm told the Spanish, who control the agenda for such Council of Ministers meetings (because they have the presidency), want to put a tricksy issue on next week's agenda.

Le model Anglo-Saxon

It's the plan to impose a big new burden of regulation on the hedge fund industry, which has its European operations heavily concentrated in London. There have been concerns about the investment trusts, which have been a concern also in Scotland, Sweden and Germany.

But the hedge fund industry thrives without regulation, and it is seen by those who dislike le model Anglo-Saxon as viewing it with particular disdain as the unacceptable face of free market capitalism.

On the plans being drawn up in parallel between the European Commission and the European Parliament, Britain stands isolated. It had some support from the Czechs, but not with much enthusiasm.

The best the new Chancellor can hope for is that his fellow ministers will stick to a convention that they don't ignore the objections of a single state where it has a clear economic interest.

But Mr Osborne will quickly learn that, in return, they'll be looking for him to play their European game. That kind of convention only comes with an understanding that he'll be similarly accommodating to others in due course.

It's possible the Spanish will be pressured into dropping the hedge fund directive from next week's Ecofin meeting, just as it was postponed from a meeting ahead of the UK election to avoid causing problems for Alistair Darling. But if not next week, then it's very likely next month.

Austerity in Spain

And even if the Council of Ministers pull back, the Parliament, which has an equal say on such matters, is more gung-ho for clamping down on free market excesses. That's particularly after some of its members have seen their national budgets driven into sharp cuts by those same hedge funds and others driving down bond prices.

We saw more of that on Wednesday (as predicted in The Ledger on
Monday) with accelerated austerity measures in Spain. (Incidentally, and of particular interest in Scotland, Madrid's ability to rein in spending and increase tax is significantly hampered by various arrangements for devolution of fiscal powers around the country.)

Wednesday also saw a very significant toughening up of the Commission's powers over national budgets. George Osborne, and his fellow finance ministers, are expected to file their draft budgets to Brussels for approval.

It won't involve departmental line-by-line analysis, there will be "more bite" for those inside the eurozone, and budget sovereignty remains with national parliament.

But economy commissioner Olli Rehn will wield his powers to pass judgement on whether George Osborne's budget plans are doing enough to bring Britain's deficit and debt under control. It's not the kind of thing that the new government's Tory backbenchers are going to like much.

Uber-regulator

With hedge fund regulation comes a broad range of other measures aimed at increasing financial market regulation in the wake of the crisis, much of which could well cause friction with the new, more Euro-sceptic ministers in Whitehall.

Plans are being drawn up for backing the increased level of bank deposit guarantees - due to rise to a maximum 100,000 euros per customer - with a deposit fund, of perhaps 2% of assets. That's on top of much increased core capital requirements.

More contributions would be required for a central "solidarity fund"
intended to avoid every country having to hold the maximum necessary funding.

On the regulatory front, the Commission's counted more than 60 supervisors across the 27 countries, but without any co-ordinating oversight role across boundaries.

So - no surprise - the Commission wants to see an uber-regulator, resolving disputes when national regulators fail to co-ordinate or agree, and with a reach across banks, insurance and pensions.

And for those banks that are so big and multi-national that their power poses a systemic risk (no definition or threshold for this is being offered), the super-regulator could do the regulating in place of national supervisors.

That's not just Allianz, Deutsche Bank and BNP Paribas. It's hard to see how it could leave the Royal Bank of Scotland or HSBC untouched.

Sound assets

The European Parliament is pushing for stronger, more centralised regulation than the Council of Ministers, and under the new treaty arrangements, this week saw MEPs and the Spanish-led legislative council trying to resolve their differences.

The next front would require a move in derivative trading towards open markets rather than over-the-counter (in bilateral deals). That should improve transparency.

Those originating securitised assets would be required to hold some, as an incentive to make sure they're sound.

Ratings battle

And while there's a concession that short-selling couldn't be banned, there is a plan being considered that temporary bans could more easily be triggered.

The European Commission is also considering how best to tackle the power of the credit ratings agencies. They're privately-controlled but provide a public good, holding sway over corporate and sovereign debt markets. Their funding, by those they're rating, is an obvious conflict of interest. And - worst of all to many in Brussels - they're American-based.

So there's a case for a European credit ratings agency. But how can these European institutions set one up, or encourage new entrants into the Moody's/Fitch/Standard & Poor triopoly?

The Commission doesn't want a new European credit rating agency to become an official arm of government, with all the weight and liability that could entail, so I'm told the issue is still in discussion.

Pushed offshore

This all adds up to a lot of new cost on Europe's financial sector, potentially weighing down a sector that's also expected to get credit flowing to private business as well as into government bonds. And somewhere in there is to be an assessment of how much that cost might be.

Wouldn't it put Europe's banks at a disadvantage, while pushing London's hedge funds to low-regulation, offshore locations such as the Cayman Islands?

Perhaps not, if you look at what's going on in the US. The land of the brave and the home of the free market has been appalled by what's been going on - not just the banks that collapsed or needed bail-outs, but by the more recent arrogance of Goldman Sachs in its return to rude financial health.

So senators in Washington are heading down many of the same regulatory roads as commissioners in Brussels.

What will London do? Vince Cable and George Osborne are now sharing power in London, armed with the rhetoric of breaking up the banks (Cable notably moreso than Osborne), but with differing party outlooks on how to handle Europe's growing interest in all this.

It looks like the financial sector's challenges and uncertainties have a long way to go.

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If the Greek economy is getting kebbabed by cuts, the future for the rest of us means more souvlaki.

That's my prediction, for what it's worth: one effect of Europe's debt crisis is that Greeks with any get-up-and-go will do precisely that.

They are, after all, a people with a history of migration.

So just as America's diners are dominated by descendants of Greek immigrants, those gap sites on high streets across western Europe could soon see a lot more Greeks bearing culinary skills.

But there's a whole lot more economic change than that hurtling down the Eurostar track from Brussels (where I find myself this week).

Lost beneath the huge weight of a 750bn euro rescue package for indebted EU member states was the publication of a report on the next stage of building an ever-closer single market.

Former commission member Mario Monti has just delivered his recommendations on a re-launch of the single market, 25 years after Jacques Delors set out his vision for it.

He was commissioned to report to the new Commission.

He concluded the single market has become unloved, even treated with "suspicion, fear and sometimes open hostility". And he's got some far-reaching conclusions.

Le shopping

No, hang on, stay with this... it's not just European gobbledygook.

This could come close to home for nearly 500 million of us - as employees, employers, consumers and citizens.

Take e-commerce, for instance. Some 37% of European citizens were shopping online last year, but there remain barriers to shopping across borders; traders who don't want the hassle of different consumer protection regimes, different VAT rates and a lack of confidence in data protection.

The plan is to remove the remaining obstacles to online Euro-e-shopping within two years.

Telecoms and copyright law are highlighted for cross-border co-ordination. There would be fewer national government blocks on takeovers of European companies.

The confusion around re-registering cars in second countries isn't a big concern of Britain's, but it's one area other members could save a lot of money.

There are proposals for cross-border recognition of wills and marriages, of debt recovery procedures, and a European Free Movement Card, with all the information a European citizen would need to live and work in another one.

There's a proposal for government bond issues to be issued centrally, and not just within the eurozone.

That may have come much closer since the weekend, when the giant loan guarantee cheque signed by finance ministers brought much closer alignment - albeit unintentionally - between the debts and obligations of eurozone members.

Gold-plating

And there's a response to British complaints that they rush to implement European directives, while others drag their heels.

The Monti report points out that it is the older members of Europe, and those inside the eurozone, who are the worst offenders.

The time it takes to drag infringements through the courts are now dragging out to an average of 28 months.

It's time to take this "very seriously" if the single market is to be re-launched.

Then there's a very insightful section on employment tax, showing how competition between EU member states has driven down business tax.

One significant result is an increasing reliance on less mobile tax bases.

In Britain and Ireland, that meant property tax and, across the continent, higher labour taxes, such as National Insurance Contributions.

Over the past two decades, the average corporation tax rate fell from 50% to less than 30%. Among the newer EU members, the average is 10 points lower.

The Monti report points out that by 2007, labour taxes accounted for 46% of total tax revenue, whereas tax on corporate income was below 10%.

The average tax rate on corporate income across the EU was 25%, while the average tax rate on labour income ran to 35%.

Open and transparent

So is it time to co-ordinate taxes better, so that they don't penalise job creation?

The report is clear that harmonising tax rates is a non-starter, with the UK to the fore in opposing that.

Signor Monti toys with the idea of bringing VAT closer into line across the union.

But if taxes can be better co-ordinated, that ought to appeal to countries - such as Britain - where it's reckoned that a more open, transparent market ought to bring opportunities for its companies.

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Why 440bn euros? Why, the official spokesman for the European Commission was asked, was that the number chosen for the gigantic safety buffer agreed at 2am by the continent's finance ministers.

The guarantee for loans is being added to a 60bn euro facility, borrowed against the European Commission's budget.

So his answer: "If you add 440 and 60, it sounds ... nice.

"And there was a strong willingness of ministers to do whatever it takes."

Add to this 500bn euro figure a further 250bn euro facility from the International Monetary Fund, and it offers another neat figure.

"That makes one trillion dollars," said another spokesman. "That's quite impressive."

Ahead of the curve

I'm in Brussels, courtesy of the European Journalism Centre, soaking up these positive vibes and huge numbers in a late night announcement that's sent stock markets soaring. The eurocrats sound rather pleased with themselves that, at last, Europe is no longer behind the curve, and has taken decisive action.

They're even more pleased that none of it is real money, yet. Apart from the money already approved to bail out Greece, the rest is in potential loans and guarantees if things go wrong, so there's no reason for the hassle and uncertainty of putting this through national parliaments unless it's required.

It should be admitted that when I wrote in the last posting of The Ledger that the market was poised for meltdown if Britain's party leaders couldn't get a deal together by last night, what I really meant was, of course, that the market-makers had their attention focused on the eurozone instead.

The London stock market had a grand day, and it was even grander in the eurozone. But the pound weakened against the dollar, and after Gordon Brown announced his resignation, along with a more complex set of coalition negotiations than we had expected, the bond market took fright at the continuing political uncertainty at Westminster.

Underlying the unfeasibly large amounts of money are questions starting with, well, obviously, whether it's enough, as it represents less than 10% of the eurozone's debt exposure.

Britain's reluctance

And how widely does the cover go? Commission officials have made it clear, here in Brussels, that Britain dug its heels in and stopped them sending a stronger political message to the markets about European solidarity.

Alistair Darling, in perhaps his final act as Chancellor, was giving his fellow finance ministers a taste of what they can expect if a Tory takes his place at the Council of Ministers.

Denmark, I'm told, supported the British line "a little bit", while Sweden and the Baltic countries were "more constructive".

The way things are seen in general here: "Britain's reluctance is well known, as is Sweden's hesitation and Denmark's reflection."

Brown's come-uppance

Gordon Brown won't be missed by finance ministers, whom he used to lecture, as Chancellor, for their failure to liberalise their economies as he had done. He got his come-uppance with the banking crisis, even though he also won their admiration for his handling of it. It seems now that they've got their come-uppance too.

Too few seemed to notice that monetary union required closer economic union, and that being uncompetitive in comparison with the German benchmark could no longer be handled by continual, gradual devaluation.

So what's being done to ensure the imbalances that led to this crisis can be tackled at root?

A combination of adding tougher conditions to European structural funds, and the hope that peer pressure from around the Council of Ministers' table will help.

Mediterranean indiscipline

The Commission spokesman hinted, in Spanish English, at blunt speaking behind the closed doors of their meeting on Sunday night: "It was the time of the truth. There was a very clear sense that this was a very serious moment in the history of our economic and monetary union."

That's not just the fault of the PIIGS - Portugal, Italy, Ireland, Greece and Spain. The indisciplined rot set into the eurozone in 2003, when Germany and France were allowed to bend the rules on breaking the deficit limit.

Expect to hear more about that on Wednesday, when Spain's prime minister tells the Madrid parliament just how much pain his fellow European leaders are requiring him to take - starting this financial year, ahead of his preferred schedule.

At the same time in Brussels, economic commissioner Olli Rehn will set out a "communication" on what the Commission intends to do about the so-called Stability and Growth Pact, to correct the indiscipline that's been afflicting eurozone members.

The emphasis has been on tackling budget deficits, with only two out of 27 countries - Sweden and Estonia - within the 3% of gross domestic product limit that should be the maximum in more normal times.

But that deficit focus is shifting. The total level of debt is going to get more attention - in which case Italy should worry.

Also look to the structural reforms needed in some countries, most conspicuously Greece.

German tourists

That's where the cuts really hit home, with painful political consequences; cutting pension and welfare entitlements, making it easier for employers to fire as well as hire, and directing government efforts towards growing sectors rather than propping up old, inefficient ones.

Expect also a push for a turnaround in countries where domestic consumption has been suppressed.

There's concern that a sharp contraction in the public sector from Greece to Spain to Ireland will shrink the whole economy, unless other parts of the eurozone are willing to boost imports from these countries.

Germany has won respect for saving lots, but Commissioner Rehn is making it clear that's got to change - its duty to Europe is to buy lots more stuff.

So there's pressure for Germans to relax constraints on shop opening hours, and lots more Germans should be heading for holidays in the indebted Mediterranean ... yes, taking their beach towels with them.

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A market meltdown awaits Britain's party leaders if they can't deliver some statement of intent before Monday's opening.

A buffeting for sterling, the bond markets and the London stock exchange is not what they need as the background to talks that will determine the shape of British government for perhaps five years, and the fate of the public finances and public services.

The irony is, of course, that it's the operation and the failings of the markets that put the politicians in the position they're now in.

And the political calculations they're making will be dominated by their fear of taking the blame for the cuts and tax rises to come.

Media pressure

This makes the talks on coalition - or a deal to ensure a minority Tory administration is not brought down on vital votes - very different to those on which I reported in a previous life at Holyrood.

But with so little experience of coalition negotiations in the UK system, it's worth noting a few of the lessons learned, particularly those being taken by Lib Dems such as Lord (Jim) Wallace of Tankerness, who led his party into its first peacetime role in government for 80 years, and who is now advising Nick Clegg.

The deals struck in 1999 and 2003 between Labour and the Lib Dems were much easier to construct than those now facing Westminster politicians, for three main reasons. One, there was no doubt that Labour had the dominant position, and as second party, the SNP could not hope to put together an alliance.

Two, the system required parties (and the civil service) to plan for coalition, so the manifestos fitted together relatively easily. Talks only focussed on a few points of difficult disagreement, and media pressure was a factor in driving them to a conclusion very rapidly, at least by continental standards.

Disproportionate power

A major sticking point in 1999 was over student fees. One problem there was that Labour at Westminster was pressurising Labour at Holyrood not to give ground. It did, all the same.

In 2003, the problem was over voting reform for councils, and that's much closer to the position now being faced at Westminster. It was not in Labour's interest to give ground, and then leader Jack McConnell was under pressure from some MSPs and his councillors not to concede the Single Transferrable Vote system.

He did concede it to the Lib Dems, transforming the politics of local government. And some within Labour were, privately, grateful that external pressure on the party was a useful way of forcing it to modernise, removing the complacency and factionalism that built up in councils dominated by one party.

There are two lessons here for this weekend at Westminster. One is that coalitions can give cover for leaders to do things that their parties may not like. The other is that smaller parties have disproportionate power.

Nick Clegg may be disappointed with his share of votes and seats, and he may be far behind the Tories. But he does not need to concede that he only gets his way a proportionate amount of the time, or on a proportionate amount of the issues.

If he brings to the table the votes that Conservatives need for a majority, he can ask for anything he wants. And if a deal is done, he and the LibDem group will continue to wield a veto - particularly on issues that are not spelled out in any partnership agreement. There is nothing proportionate about the power he now wields.

Escape route

In the case of Scottish Lib Dems doing a deal at Holyrood, their position was weakened by their desire to do a deal. But the way things look at Westminster, there are plenty reasons why Nick Clegg might want to find an escape route.

Most notable among them is the pain and the blame that lies ahead.
He's stressed that he's up for being responsible at a time when the public finances require that. But just how responsible will he be, and how responsible will his party allow him to be?

On that money question, there lie significant differences between Holyrood and Westminster. The 1999 and 2003 deals were struck during a period of unprecedented increases in public finances. The difficult choices were over how to spend the bonanza.

And manifestos at Holyrood are much more detailed. The two partnership agreements have been likewise. But the manifestos at Westminster are less so. And the nature of the powers held there - over the economy, public spending totals, foreign affairs and defence - require much more flexibility in responding to events and external pressures.

That's true in any newly-elected parliament at Westminster. It's particularly true of this one, in which those notorious "events", of the economic and market variety, were flaring ominously on polling day itself.

It will be much more difficult to get a coalition deal when the big issues lying ahead are so unpredictable.

Stroppy Labour

On that, a lot will depend on the personal chemistry between the leaders of the coalition parties. If it's like Holyrood, they'll take up much of their time in continuously negotiating their way through differences and difficulties.

Between 1999 and 2003, that meant Jim Wallace struggling to herd the Lib Dem cats into backing Labour - or using them as leverage to get better deals out of the three Labour First Ministers with whom he worked.

The 2003 deal had more nailed down, the more wayward Lib Dems were brought into the tent, and it was Labour backbenchers that were more likely to get stroppy about demands being made by Lib Dems.

That's a reminder of a vital point in any coalition negotiations, particularly ones taking place where all the party leaders start from a position of weakness and disappointment.

Parties are, themselves, coalitions of interests and factions. From 1990 to 1997, the Conservative government led by John Major was a coalition of moderates and Thatcherite Eurosceptics.

From 1997 to 2007, Tony Blair's government was an extraordinary coalition of Blairite and Brownite factions, absorbing much of its energy in internal fighting and negotiations.

Ministerial Mondeos

And of course, much of that came down to arguments about jobs. The golden rule applied by Scottish Lib Dems about coalition talks is to leave the ministerial jobs, and who gets them, to the last stage of talks.

In 1999 and 2003, the jobs seemed quite attractive. In the media, there was much talk of the perks including ministerial Mondeos.

The jobs seem much less attractive now, even if they have a chauffeur and something much bigger than a Mondeo - and particularly if the Lib Dems' Vince Cable is to be offered anything involving the wielding of an axe in the Treasury.

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Markets are open through the night, giving traders the opportunity to react to election results as they come in.

Likewise, the currency markets, which remain open round the clock somewhere round the world, will make their own judgements on the economic implications of the way British voters vote.

And it is their judgements that will be the first headache confronting the new (or continuing?) Chancellor of the Exchequer.

Whether or not there's uncertainty resulting from British polls, the emergence of a new government could hardly come at a more alarming time for markets, where jitters about European debt turned to panic on Wall Street on Thursday afternoon.

The credit ratings agencies - discredited though they may be by their failures to spot trouble looming two years ago - have held off a judgement on Britain's mounting sovereign debt worries. They couldn't be seen to interfere, could they?

But as voters did the business on Thursday, we got a reminder that they're ready to review things once the government settles down.

With the markets pricing in a very high risk of a Greek default on sovereign debt, still pricing bonds today at a 15% return despite the intended reassurance of 110bn euros of bail-out loans - Moody's confirmed that Portugal is next in its cross-hairs.

Problem 'manageable'

Spain and Italy are next after that, though the sense of contagion hasn't yet reached Italy. And then it's off to the Atlantic coast, to Ireland and the UK. Britain, you'll note, is the only one that could help itself with devaluation.

But Moody's note emphasises that Britain's deficit and fast-growign sovereign debt allied to an unusually big banking sector can be a bad combination, as trouble in private and public sector feeds of each other.

The problem for France and Germany, apart from having to provide loans for Greece, is their private banks' huge exposure to Greek debt; US$75bn for France, US$45bn for Germany.

Figures from the international bank organisation show British banks are also exposed to around US$15 bn of Greece's debt.

All we've heard so far from the Royal Bank of Scotland is that its problem is "manageable".

Drastic things

So steadying the ship, and persuading the markets the new British government is serious about cracking down on the deficit is priority number one for Chancellor Osborne/Darling/Balls/Cable.

And if they look at the law passed today in the Greek parliament, it shows just how drastic things have to be to handle a deficit of similar scale:

Public sector pay has been frozen until 2014, with public sector salary bonuses, equivalent to two months pay - have been scrapped or capped.

Pensions have been frozen or cut, with the retirement age up. VAT is up from 19 to 23%, and tax on fuel, tobacco and a bottle of ouzo and its alcohol ilk is up by 10%. (Note: Greece is a big market for Scotch whisky.)

How would that go down in Britain? Rioting, or a stiff upper lip?

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