Alex Massie

Economic Policy Trust Test: Labour or the Germans?

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A good old-fashoned rumpus is developing. Seems as though the Germans, fed up with being sneered at by Godron Brown and irritated by the Prime Minister's pretensions to have "saved the world" have decided to poke the PM in the eye. As Peer Steinbruck, the SPD Finance Minister told Newsweek:

We have a bidding war where everyone in politics believes they have to top up every spending program that's been put to discussion. I say we should be honest to our citizens. Policies can take some of the sharpness out of it, but no matter how much any government does, the recession we are in now is unavoidable. When I look at the chaotic and volatile debate right now, both in Germany and around the world, my impression and concern is that the daily barrage of proposals and political statements is making markets and consumers even more nervous.

The speed at which proposals are put together under pressure that don't even pass an economic test is breathtaking and depressing. Our British friends are now cutting their value-added tax. We have no idea how much of that stores will pass on to customers. Are you really going to buy a DVD player because it now costs £39.10 instead of £39.90? All this will do is raise Britain's debt to a level that will take a whole generation to work off. The same people who would never touch deficit spending are now tossing around billions. The switch from decades of supply-side politics all the way to a crass Keynesianism is breathtaking. When I ask about the origins of the crisis, economists I respect tell me it is the credit-financed growth of recent years and decades. Isn't this the same mistake everyone is suddenly making again, under all the public pressure?

It's the yearning for the Great Rescue Plan. It doesn't exist. It doesn't exist! Dealing with an unprecedented crisis is a puzzle, a trial-and-error. Honestly, I don't know. I tend to be skeptical because it is human nature to see the crisis as even worse than it is. I don't want to downplay anything; 2009 looks like it will be a very difficult year. But we are not about to collapse.

This is very troubling stuff since it's more or less where my own  - blind - hunch lies. Of course I know very little about economics and have to hope that the German finance minister has a better grip on these matters.

Noteworthy too that Herr Steinbruck is a man of the left. As the BBC's Nick Robinson points out, despite Labour's attempts to spin this as a matter of German domestic politics, it's more probable that the Germans are saying this because they think Britain is trying to lead everyone off a cliff. Let's have a look at today's news: not only has the government run up more debt than was needed to fight and win the First World War, we don't have any money to go abroad either. With the pound approaching parity with the euro, all holidays are now to be taken in Britain.

The next step? Something called "Quantative Easing" which, as best I can tell, is just a fancy term for printing more money. That sounds encouraging, doesn't it?

Written byAlex Massie

Alex Massie is Scotland Editor of The Spectator. He also writes a column for The Times and is a regular contributor to the Scottish Daily Mail, The Scotsman and other publications.

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