Leading article: In other news...

16 July 2011

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While Britain is fixated on the fall of the house of Murdoch, a much greater drama is unfolding.

While Britain is fixated on the fall of the house of Murdoch, a much greater drama is unfolding. The eurozone crisis has spread from Greece and is now threatening Italy, whose economy is five times larger. If Italy defaults, the continent will fall back into recession — and Britain will be in trouble. The great tap of international borrowing on which we depend may run dry again.

The best chance of avoiding such a calamity rests with Angela Merkel and the patience of the German taxpayer. So far, however, Ms Merkel is refusing to create the tool which the Greeks and Italians want: a eurobond. This would allow the eurozone to borrow directly, as a single entity, but it would bind member states more closely together. It would further mean giving Brussels more control over taxes, spending, wages and welfare — creating a federalist core of the eurozone. No sensible German likes that idea. But the alternative, an Italian default and a Europe-wide debt crisis, could be worse.

George Osborne is looking on nervously. He is calling for ‘decisive action’ in the eurozone — urging Merkel on. But if Britain were reducing its debt, or pursuing a radical pro-growth strategy, we would have far less to fear. Instead Osborne has adopted a version of Alistair Darling’s recovery plan and will shave a whisker — just under 1 per cent a year — off what Darling and Brown proposed to spend. The rest of the plan — cheap debt, large deficits and a see-no-evil approach to inflation — is intact.

Osborne is lucky. For now, his government can borrow as cheaply as Germany can, even though Britain has a Greek-style deficit and Italian-style levels of state spending. But market sentiment can change in an instant, as Italy and Greece are learning. The danger for Osborne is that these nervous markets begin to doubt Britain’s recovery plan: not so much his proposed cuts, but the growth he has promised. Where is it? The Chancellor has raised tax and let inflation rip — not exactly a recipe for recovery. The fear is that, very soon, markets may conclude that Britain, like Italy, has fallen into a low-growth, high-debt trap. Osborne should take this threat seriously. Many in Britain are beginning to ask what his growth strategy really is. Is he struggling to articulate one? Or has he struggled to think of one? The solutions should be obvious. Emergency tax cuts for the low-paid — funded by more ambitious savings on state spending — would be a good place to start. Much more needs to be done to encourage British people to take the jobs that are on offer.

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Sockeye

July 22nd, 2011 8:05am Report this comment

Another reason why mentioning Katrina is getting stale is that Atlantic hurricane activity (and also globally) has falling to historic low levels during the last 6 years since Katrina and during the "warmest" decade since the dawn of time began. Why doesn't Beddington therefore take the opposite implication from this that global warming means fewer hurricanes? The fact he is pushing outliers as indicators of a trend really shows he is just a huckster.

Anoneumouse

July 22nd, 2011 8:14am Report this comment

You could say the Beddington is a Dr Zaius character. Chief Scientist and defender of the faith.

Mactheknife

July 22nd, 2011 10:46am Report this comment

I recently wrote to the government via my MP on their climate chnage policies. The response from Greg Barker (Minister of State DECC) was deviod of critical scientific thought and trotted out the usual "concensus" nonsense. Quite frankly it was laughable, but it would seem that Beddington / Huhne "green propoganda" machine has taken a very firm grip on policy.
Did anyone notice a statement on rising energy prices by (I think SSE) when they said one of the factors was "mandatory and social" requirements i.e. the Climate Change Act.

Fay Kelly-Tuncay

July 22nd, 2011 8:06pm Report this comment

More scares and more propaganda just what we need right now! The politics of fear is wearing a bit thin. Beddington’s actions reflect both the greens and the global warming lobbyists desperation. Nobody listens anymore, but everybody is concerned about their energy bills, fuel poverty and the risk of losing their job due to CO2 taxes. Polls indicate 75% of the public do not see global warming as a threat and the green taxes hidden into our energy bills are certainly not a vote winner.

But, who will be the first MP to stand up to these global warming bullies and unpopular green taxes?

When will the likes of Beddington and Cameron GO? SOON I HOPE.

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