Economy

Sunday

James Forsyth

What Hollande’s victory means

Tonight’s election results mark the next challenge to the euro. In France, the Socialist candidate François Hollande has won. Having campaigned on changes to the fiscal compact, Hollande will have to deliver something on this front. But Angela Merkel, with her own elections next year, will not want to agree to anything that appears to be a watering down of the pact. I doubt, though, that there’ll be that much market reaction to Hollande’s victory. City sources say that it has been priced in for while and that there is an expectation that Hollande will merely accept some window-dressing about growth being added to the agreement. But what could set

Peter Hoskin

Balls wants you to trust him

It’s only ten days or so since Ed Balls was last quizzed by Andrew Neil, but there he was rehashing many of the same lines on the Sunday Politics today. Among the things that stood out was this: the shadow chancellor’s argument on the public finances is ever more cleaving into two halves. First, he accuses George Osborne of borrowing £150 billion more over this Parliament than originally planned. (Although there’s a detail that often, conveniently, gets obscured: namely, that borrowing is still going down year-on-year under Osborne’s plan). Second, that Balls’s plan would decrease borrowing in the medium-term even though it would increase spending and reduce tax revenues in

James Forsyth James Forsyth

Osborne brings it back to the economy

It wasn’t, as expected, Nick Clegg on Marr this morning but George Osborne as the coalition attempted to move the argument back onto the economy. Osborne kept stressing that the government would focus on the things that ‘really matter’ to people; code for we’re not going to spend too long on Lords reform. Indeed, given that Nick Clegg has turned down a compromise on that, we now appear to be heading for — at most — a referendum on the subject. Osborne defended his deficit reduction programme, arguing that the lack of growth was a result of the Eurozone crisis and the oil price spike. But he did concede that

Thursday

Clarissa Tan

Mervyn’s mini mea culpa

The newspapers and internet today are full of headlines about Mervyn King admitting the Bank of England was ‘late to the game’, and that central bankers should have ‘shouted from the rooftops’ regarding the financial blow-up. It’s true, the BoE governor did make these ‘mea culpa’ remarks — but they came rather half-heartedly, and couched within a radio lecture that seemed to point even more fingers at other parties.   King was giving the Today Programme Lecture 2012, which he addressed to a Radio 4 theatre audience yesterday evening. Early in the half-hour speech, he gave an anecdote from 1997, in which then-governor Eddie George and him, Merv, celebrated Gordon

Fraser Nelson Fraser Nelson

GOD isn’t good enough for Threadneedle Street

When Gus O’Donnell was running the civil service, he was known by his initials — GOD. It seems to have gone to his head. He says in this week’s House magazine that he’s considering applying to be Governor of the Bank of England, and in the same interview exposes his failure to grasp modern economics by saying it would be dangerous to put income tax back to 40p (which was the plan even under Gordon Brown). It is striking that the technocrats like O’Donnell now want to run the show explicitly (as his endorsement of a civil service candidate for Mayor, Siobhan Benita, demonstrates). That Sir Gus is even in

Wednesday

James Forsyth

Fears heighten as the Eurocrisis rumbles on

For all the coverage of hacking, pasty tax and the like, the continuing crisis in the eurozone remains the most significant political story. Until it is resolved, it is hard to see how the UK returns to robust economic growth. I suspect that the market reaction to a Hollande victory will be limited as it is already pretty much priced in. Those expecting a degringolade will be disappointed. However, if Hollande does actually try and implement some of his more extreme ideas, the markets could take fright. What is far more worrying than France is Spain. There’s a growing sense of inevitability that the Spanish banks will need a bailout

Tuesday

Alex Massie

Waiting for Growth

With apologies to the Beckett Estate… Two tramps appear on stage. They are dressed in white tie and tails and wearing top hats. Their clothes are dirty and shabby; their hats gleam. The stage is bare, apart from a mound of earth and a tree. Which appears to be dead. ACT ONE: David: [gloomy] It’s too much for one man. On the other hand what’s the good of losing heart now, that’s what I say. We should have thought of it a million years ago, in the nineties. George: What do you expect, you always wait till the last moment. David: [Ponders this] The last moment… Hope deferred maketh the

Sunday

James Forsyth

Cameron’s Euro line

One line jumped out at me in David Cameron’s Marr interview this morning. When Andrew Marr asked him if he thought we were halfway through the Euro crisis or nearing the end of it, Cameron replied: ‘I don’t think we’re anywhere near half way through it.’ Cameron clearly does not believe that any resolution to the crisis is in sight. Given that, as long as the Eurozone crisis rumbles on it is hard to see how the British economy returns to robust growth, this is immensely significant. It does, though, make me wonder if the government’s approach to the crisis should now change. If the Eurozone isn’t going to accept,

David Blackburn

Cameron on the defensive

‘As things stand, I don’t believe Jeremy Hunt broke the ministerial code,’ said David Cameron to Andrew Marr earlier this morning. But the prime minister reiterated that he would act if new evidence came to light when Jeremy Hunt gives evidence to the Leveson inquiry. Cameron also indicated that he would not wait until Leveson reports in October to punish a breach of the ministerial code. And if Leveson does not clear up the issue, then the Hunt case would be referred to Sir Alex Allan. ‘I know my responsibilities,’ Cameron said time and again. In addition to putting Jeremy Hunt on probation, Cameron took the opportunity to defend his

Friday

Peter Hoskin

Osborne’s turning point

As Paul Goodman suggests, there is something significant about Liam Fox’s article for the Daily Telegraph this morning. It’s not that we haven’t heard similar from the former Defence Secretary before — we have. It’s more that his economic prescriptions are being made, we learn from the Sun, with the ‘explicit approval’ of his buddy George Osborne. And what are those prescriptions? Well, the main one is for further spending cuts, and Fox also waxes enthusastic about greater deregulation and about protecting the defence budget (at the expense of international aid). He also has some firm advice for the Lib Dems. ‘They make up only one sixth — not one

Thursday

Alex Massie

The Austerity Myth

On the global scale of hackish irritation, the American left’s persistent determination to misdiagnose the reasons behind Britain’s faltering economy cannot be considered the most grievous pundit-crime. Nevertheless, it remains annoying. Here, for instance, is Joe Klein: Word now comes that Great Britain has slipped back into recession after several years of David Cameron’s austerity experiment. It seems, yet again, that John Maynard Keynes has been proven right. Real Keynesianism–government deficit spending–is essential when economies go bottom up. This can mean more government programs or lower taxes, or a combination of the two. That would seem to be plain vanilla logic, right? But you’d be amazed how many otherwise intelligent people

Wednesday

Fraser Nelson

Balls’s argument is detached from reality

So who killed the recovery? Ed Balls points to a ‘recession made in Downing St,’ and has gone on a victory tour today. ‘I have consistently warned David Cameron and George Osborne for over a year that going too far and too fast on spending cuts would backfire,’ he says. ‘Arrogantly and complacently they ignored those warnings, and the country is paying a heavy price.’ Facts are always the remedy to an outbreak of Balls. The government releases monthly spending figures, which show an increase overall. That’s due to the rising cost of debt and dole, you might say, but strip those two out and you have what the ONS

Lloyd Evans Lloyd Evans

In PMQs, Cameron has no answers on Hunt

Ed Miliband led on the economy at PMQs. But he was only warming himself up for the main event. Leveson dominated proceedings. David Cameron lamented the ‘disappointing’ news that the country has slipped back into negative growth. ‘It’s all bluster,’ crowed Miliband. ‘His plan has failed.’ This recession was made in Downing Street, he said, by an ‘arrogant Prime Minister and his Chancellor’. It was potent, punchy stuff from the Labour leader. And he was helped by Ed Balls who has clearly been ordered to clam up during PMQs. Instead of wriggling and calling out names, Balls sat there motionless and mute. His stony glare added to the pressure on

Jonathan Jones

Britain’s longest downturn

As of today, we now have four years’ worth of GDP figures since the UK first went into recession — and they don’t look pretty. By this point in the 1930s, we’d already fully recovered from the Great Depression. This time, we’re still more than 4 per cent below where we were at the start of 2008: And the international comparison isn’t very flattering either:

James Forsyth James Forsyth

The economy adds to Cameron’s woes

This morning brought the economic news that the coalition has been dreading: the country has double dipped. Now, this is based on preliminary figures which may well be revised up. But, as Pete says, the political impact of this story will be huge. The government’s handling of the economy has now been caught up in this whole argument about competence. It provides quite a back-drop to Rupert Murdoch’s testimony today. PMQs today has now taken on a special significance. Ed Miliband has two massive targets to aim at, the Jeremy Hunt revelations from yesterday and these GDP figures. For Cameron it will be his most testing appearance at the despatch

Peter Hoskin

Our economy fell back into recession

Or at least technically-speaking it did. The figures released this morning suggest that the economy shrank by 0.2 per cent in the first quarter of this year, which is the second quarter of shrinkage in a row after last winter’s 0.3 per cent fall. The numbers are tiny, but the politics is huge. It’s a double dip — and you can expect Ed Miliband to mention that fact again and again in PMQs later, with dread accompaniment from Ed Balls and his hand gestures. There are some caveats, of course. This is only a preliminary estimate, so the Office for National Statistics could revise it upwards at some point. It’s

Tuesday

Peter Hoskin

The Eurocrisis persists

Holland and Hollande; they’re the non-identical twins that are causing palpitations across Europe today. Holland, because the country’s Prime Minister yesterday resigned after failing to agree a package of cuts for his country’s budget. Hollande, because he’s the socialist candidate set to win the presidential election in France, probably eroding that country’s commitment to fiscal consolidation in the process. The markets quivered in fear at this morning’s headlines — and what they mean for the eurozone — even if they have, in some parts, slightly recovered since. It’s all another reminder that the Eurocrisis just isn’t going away — neither for countries such as France and the Netherlands, nor for

Monday

Clarissa Tan

QE is a government hijack, says King

While Mervyn continues to inflate our universe via Quantitative Easing, another Mr King — Stephen, the chief economist of HSBC — has issued a report saying QE is a way for governments to ‘hijack the credit system’. ‘The financial system is being rigged via acts of financial repression as governments look for new ways of funding excessive debts,’ says King in his bluntly worded report. While he doesn’t cite the UK or Sir Merv by name, it’s clear that reference is being made to QEs I and II, the government’s preferred means of stimulating lending through lowering borrowing costs. Financial repression — basically, when governments fund their borrowing through imposing

Peter Hoskin

Is Alexander ushering in Austerity Squared?

23rd April, 2012 — mark it down in your calendars, CoffeeHousers. For, after weeks of froth and fury about tax, today’s the day when the government focused on spending cuts again. In a speech to the Institute for Fiscal Studies, Danny Alexander has announced what are, in theory, a couple of new restraints on spending. First, government departments will have to share information about their spending with the Treasury on a monthly basis, and let Osborne & Co. pore over it. And, second, they will also have to find extra capacity in their existing budgets for unforeseen expenditure, rather than just relying on the Treasury’s central reserve. Alexander described these

Friday

Fraser Nelson

Lewis Hamilton vs Ed Miliband

Every so often, British sportsmen are prevailed upon not to go to certain countries, in protest at some usually-hideous policy. Now it’s the turn of our racing drivers. Yvette Cooper said on Question Time last night that, at the very least, Jenson Button and Lewis Hamilton should pull out of the Formula One race this weekend. Ed Miliband wants the race to be cancelled. What baffles me is that the racing drivers should be seen as so controversial, whereas (so far as I can tell) neither Cooper nor Miliband has had anything to say about the British government approving the sale of arms to Bahrain long after its uprising started