Economy

Monday

Nick Cohen

Why are the unions frightened?

Labour has only ever won a general election from the autumn of 1974 onwards when its leader has been called &”Tony Blair”. Four other leaders tried, but they were not called &”Tony Blair,” and Labour paid the price. I find it hard to credit the left’s failure myself sometimes, and, equally, find it easy to understand how Labour supporters became riddled with self-hatred and self-doubt as they saw ‘their’ Blairite government in action. But it is going a bit far for Paul Kenny of the GMB to deal with the compromises of the past by calling on Labour to declare the Blairte think tank Progress an anti-party organisation and ban

Sunday

The Skimmer

Fisking Peston

How to explain the King-Osborne plan to pump more cheap credit into the economy? Robert Peston gave his explanation of last week’s Mansion House speech. Here, our occasional media correspondent, The Skimmer, gives his thoughts on Peston’s thoughts: Peston: The Bank is saying that, in a business-as-usual way, with no stigma attached and at a cheaper interest rate, it will provide the funds that till now it would only provide through its so-called discount window – which is where banks go to borrow in an embarrassing emergency. The Skimmer: Every other central bank in the world has been doing this as part of normal operations for five years now – this

James Forsyth James Forsyth

The worst of all possible worlds

The Greek election has, in terms of the Eurozone crisis, produced the worst possible result. If the Interior Ministry’s initial projections are accurate, New Democracy has come first. But it is hard to see how they can form a coalition given that PASOK, the party of the establishment left, have said they won’t go into coalition without Syriza, the anti-bailout party. PASOK’s ambivalence is understandable given that any party that goes in with New Democracy is likely to be wiped out at the next election. But the coming Greek stalemate is likely to make life particularly difficult for central bankers: do they act before tomorrow morning or wait for the

James Forsyth James Forsyth

The return of Osborne’s good spirits — and his cat

The most important event today is the Greek election, with its huge implications for the future of the Eurozone. But this morning, the political class is chattering about George Osborne because of the poll which Fraser blogged about earlier. Osborne is one of the more self-aware politicians that you’ll meet. One colleague says, only half-jokingly, that Osborne’s mood is the best guide there is to the future prospects of the government.  In recent weeks, Obsorne has not been in good form—his post Budget woes and the never ending crisis in the Eurozone appeared to be getting him down. As one person who works closely with him remarked to me recently,

Fraser Nelson Fraser Nelson

Osborne, class and competence

The Sunday Mirror and the Independent have jointly commissioned an opinion poll which finds that George Osborne is ‘too posh’ to be chancellor. This just happens to fit the prejudices of both newspapers, and I for one do not believe it. Poshness certainly obsesses Tory strategists, and Gordon Brown sometimes played the class card because he saw how much agony it caused them. But Brown’s card was not the winning trump he hoped for because the British public is not as obsessed about class as the British elite. That’s why it backfired when Labour tried a class strategy in the Crewe by-election campaign. That by-election suggested that the average British

Saturday

Fraser Nelson

Language, politics and debt

The myth that George Osborne has held firm on his deficit reduction plan persists. When I was on Question Time last month, Alan Duncan said that Osborne may have changed some policies but he had not budged an inch from the deficit reduction programme. This was not a porkie; he genuinely believes this to be true. And even in today’s FT, economics editor Chris Giles describes the government’s strategy as ‘maxing out on stimulus measures, short of relaxing deficit reduction.’  In fact, Osborne tore up his deficit reduction plan ages ago, but to minimum press comment.   The single largest decision Osborne has taken since his first Budget was to

Friday

James Forsyth

Osborne leans on King

What we saw at the Mansion House last night gave us some hints of where British economic policy will go if the Eurozone start to fragment. For the moment, Osborne is persisting in getting the Bank of England to do the heavy lifting using monetary policy rather than attempting a fiscal stimulus. The first line of defence is what one source described to me as ‘highly active monetary policy.’ The fact that the chancellor has persuaded the notoriously prickly Bank Governor to offer loans against weaker security is a definite success for him and a sign that he’s developed a far better relationship with King than either Brown or Darling.

Freddy Gray Freddy Gray

Will Romney win?

In this week’s issue, the great Robert Emmett Tyrrell, Jr. makes a bold prediction about the upcoming American presidential elections: ‘The Republican nominee will come out of the Republican convention in August with a full head of steam. Boosted by years of growing strength and aided by the independents’ concern for Obama’s huge deficits and slow growth, he will barrel through the autumn and on to victory in November. Obama will soon be back in Blue Island Illinois, creating his own presidential museum.’ Don’t believe him? Look at the economy. Only a few months ago, America’s financial health seemed to be improving. Team Obama was lecturing European conservatives about the

Daisy Dunn

The pain in Spain | 15 June 2012

Something’s amiss when a nice glass of Rioja in the middle of Madrid costs just €1.90. As Spain’s credit rating approached ‘junk’ status yesterday the country recorded a dramatic decline in house prices for the first quarter. The scale and impact of the problem is everywhere visible on the city’s streets. A rising homeless population crowds the main arteries of the capital from Atocha Station to the Gran Via, searching restaurants and plazas for the elusive euro. For anyone but the tourist, the price of sustenance is felt to be high.   The Englishman (the Spanish generally refer to anyone from the UK as such, though the tourist with sunburn

Fraser Nelson Fraser Nelson

Osborne’s debt spiral

‘If we lose sight of the central role of debt in this crisis, we will come to the wrong conclusions about how to respond,’ said George Osborne last night — before announcing another massive tranche of debt. The Mail and The Telegraph put it at £140 billion, the Times and the FT at £100 billion and Bloomberg at £5 billion a month. ‘The government, with the help of the Bank of England, will not stand on the sidelines and do nothing as the storm gathers.’ CoffeeHousers may hear an echo of Gordon Brown’s language here, contrasting advocates of a Keynesian spending plan with the ‘do nothing Conservatives.’ Now it’s Osborne,

Fraser Nelson Fraser Nelson

How not to create jobs

The Keynes vs Hayek debate is at its sharpest on the issue of employment. Can government create jobs (as Balls says)? Or does large public sector employment simply displace economic activity that would happen elsewhere (as Osborne says)? A fascinating study has been released today by the Spatial Economics Research Centre at the LSE showing the damage done by public sector employment to the real economy. Drawing on a huge amount of local-level data over an eight-year period, it’s a serious piece of research that is worth looking into and deserves to impact our economic debate. 1. First, what is seen. In the short term, hiring someone to work for

Thursday

David Blackburn

Osborne, competitiveness and confidence

George Osborne will formally unveil the government’s banking reforms in a speech at Mansion House later this evening. The reforms are in line with the recommendations of Sir John Vickers’s Independent Banking Commission (ICB), as laid out by the Treasury, which published this White Paper earlier today. For those who’ve forgotten, Vickers suggested splitting retail and investment banking through a Glass-Steagall-type ‘ring-fence’ mechanism that would protect retail, SME deposits and overdrafts while commanding that the ring-fenced part of the bank is not dependent on other departments for liquidity. This, it is hoped, will ensure that the taxpayer is insulated from bailouts in the future, which is, obviously, a key political

Tuesday

Ryan Bourne

Economic lessons from Germany

The Eurozone crisis is teaching us plenty about how to recover from recessions. The nations that tried a debt-fuelled stimulus have found that their economies haven’t grown much, but they are saddled with the extra debt. The Swedes have cut taxes for the low paid, the Estonians took the fast route back to fiscal sanity — and both are now growing well, in spite of the turmoil that has engulfed their neighbours. But what’s less well-known is Germany’s record of reform, and how it has helped the country reach unemployment at a 20-year low.   Ten years ago, the German economy itself was pretty stagnant. When it first entered the

Monday

David Blackburn

Dissenters against Osborne

George Osborne has much to ponder this morning. First, there is the small matter of his evidence to the Leveson Inquiry later today (assuming that someone can check Gordon Brown’s loquacity), which will prove diverting for those who remain gripped by those proceedings. Then there is the larger matter of the £80bn Spanish bank bailout. Osborne has welcomed the rescue, arguing that the Eurozone must survive and thrive if Britain is to prosper. His analysis is that the crisis on the continent is impeding domestic recovery. Fraser argued yesterday that this is a half-truth which verges on being a conceit. A number of Conservative backbenchers share Fraser’s scepticism and they

Saturday

James Forsyth

A poor man’s compromise

The expectation in both Brussels and Whitehall is that this weekend will see a bailout for Spain agreed. It appears that a compromise which would not impose harsh external conditions, which is why Madrid has been rejecting offers of help to date, but would satisfy German concerns about bailouts simply encouraging reckless behaviour, is close to being reached.   But this does not mean that the Eurozone governments will be doing anything to get properly ahead of the crisis. Instead, they have decided to wait until after the results of the Greek elections before deciding what to do next.   The increasingly agitated statements coming out of Washington reflect a

Thursday

Clarissa Tan

‘Communism’ vs socialism

Two bits of interesting news yesterday: 1. France – while the eurozone is in financial meltdown – is allowing some of its workers to retire early; 2. China – while the eurozone is in financial meltdown – is on a shopping spree, buying European assets on the cheap. Perhaps there we have, in a nutshell, the pattern of what is to follow in the coming months. Francois Hollande’s lowering of the pension age by two years to 60 applies to only a small class of workers, but it appears to be just the start of a slew of changes to employment laws — today, his government announced it would make

Wednesday

Clarissa Tan

Do we really need the upcoming G20?

We’re all familiar with the eurozone boom-bust news cycle by now. First, there are reports of more European banks in trouble, then news of governments seeking bailouts, closely followed by speculation over the future of the euro. Then, as if to crown it all, there will be news that global political leaders and finance ministers are about to hop on planes to attend one G-Digit meeting or another. This time, as it happens, it’s the G20, in about a fortnight’s time, in Mexico.   With Spain in deep financial crisis, German banks downgraded by Moody’s, the US economy apparently stuck in a rut and the Chinese growth engine sputtering, are

Monday

Clarissa Tan

Egan-Jones cuts UK credit rating

Even as the Queen’s Diamond Jubilee BBC Concert rocked on outside Buckingham Palace (amid the slightly worrying news that the Duke of Edinburgh is in hospital), some bad economic news came in — rating agency Egan-Jones has cut the UK’s credit rating to AA-minus with a negative outlook, from AA. ‘The over-riding concern is whether the country will be able to continue to cut its deficit in the face of weaker economic conditions and a possible deterioration in the country’s financial sector,’ Egan-Jones said in its statement, according to Reuters. ‘Unfortunately, we expect that the UK’s debt-GDP [ratio] will continue to rise and the country will remain pressed.’ Egan-Jones is

Friday

Rod Liddle

Grand follies

The economy’s not looking terribly good, is it? Manufacturing has sunk to a three year low, rather worse than anyone expected — and the Eurozone crisis is only partly to blame. I note that our manufacturing sector now constitutes just ten per cent of the economy. One reason for this is that it has been starved of investment and the quantitative easing, as these monkeys call it, which will now be sprayed lightly in its general direction will do little to affect the overall trend, which is ever downwards. It seemed unlikely to me that we would ever see a clearer and more self-evident example of a political class being

Thursday

Fraser Nelson

Osborne’s falling star

It’s tempting to see comedy in the government’s 30th U-Turn, but there’s a more serious side to this. It fits a pattern: act first, think later. The lack of special advisers in government is part of the problem. Even in the Labour days, I argued for more and better political appointees to help a reforming government get its agenda through. But the problem this time was George Osborne’s chillaxing approach to being Chancellor, coupled to what seems to be a casual disregard for detail. This approach was embodied in his decision to join Cameron on White House jolly the week before delivering his shambolic Budget. It makes you wonder if