Leading article: In other news…

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.