Finance Minister Paula Cox has largely escaped serious criticism in the past for the state of both the Government's finances and the economy. The reasons for that are relatively simple. Ms Cox could not be held responsible for the global economy, and until relatively recently, the local economy seemed to be literally unsinkable.

That now is changing as awareness grows that the Bermuda economy is heading into a very difficult period and as it becomes clear that Government's finances are in much worse shape than expected.

The news that Government will have had to borrow an additional $100 million for the 2008-9 year to cover increases in spending and revenue shortfalls means that Government's forecasting and fiscal discipline are badly off. A $30 million shortfall in the first quarter of this financial year exacerbates the problem. To be sure, few could have predicted the severity of the crash of October, 2008, but there were plenty of people, with Shadow Finance Minister E.T. (Bob) Richards among the leaders, who were sounding warnings that the US economy was on an unsustainable path.

But the Government continued on its way, allowing both overspending on capital projects and failing to rein in current account spending.

Indeed, Ms Cox's target of ten percent cuts in spending by Government Ministries was ignored by most, and now the fear must be that the 20 percent cuts Ms Cox is seeking for next year will be ignored too. In any event, the targets are probably unrealistic. So long as Government is determined not to lay off staff, which would be unwise anyway, the target literally cannot be reached. That's because personnel costs account for more than half of Government's current account spending.

Nonetheless, Ms Cox cannot be held wholly responsible for the problems, and can take some credit for keeping international business going. Although she is Finance Minister and Deputy Premier, she is bound by collective responsibility within the Cabinet which is headed by the Premier. And if the Premier and the Cabinet fail to show the will to trim spending and to manage the economy sensibly, then all are responsible when things go wrong.

Thus, Bermuda remains committed to programmes like Future Care which as worthy as they are, seem increasingly unaffordable. Government also continued to add staff in the face of a worsening recession and failed to control runaway costs on public projects.

As a result, Bermuda faces a credit crunch just when it would be justified in borrowing.

That's because current debt today, instead of standing at $683 million as projected in February, must now be closer to $800 million, based on the latest statistics released by Government. That makes it difficult for Government to borrow more, just when private sector construction is slowing down and there is a need for public sector capital projects.

Instead, Bermuda has to hope that some of the long-promised hotel construction projects actually take place and that international business expands. There is a chance that the Club Med project will get going and that the Coco Reef project reported on yesterday will occur early next year. And international business looks healthier than it did 12 months ago, although tax threats still loom over it, and it seems unlikely that many companies are adding jobs. But whether all of this will occur is an open question, and it is all too tenuous for comfort.