Economy

Friday

James Forsyth

The deep Euro-crisis threatens political stability

It is hard to overstate how serious the crisis in the eurozone is or what it might do to the politics of Europe. The European project is putting in danger the very political stability in Europe that its supporters have always claimed to be its strategic and moral justification. I understand that American banks are now so nervous about the situation on the continent that they have effectively stopped new lending to European banks. The view in Westminster today is that the Greeks will avoid default for a little longer. But few can see them making it to Christmas. Indeed, the expectation seems to be a default sometime in October.

David Blackburn

Osborne: I know what it’s like to be in business

George Osborne spoke to Telegraph’s Festival of Business this morning and he gave a speech that was dominated by the issue of growth, or rather its absence. He reiterated the tax cuts and entrepreneurial relief measures first unveiled in March’s Budget. Osborne didn’t limit himself to his list of accomplishments. It was an empathetic speech. He related his memories of the “ups and downs” of his father’s business, the drapers Osborne&Little. He acknowledged the pressures of running your own enterprise in conjunction with a busy family life; a constant struggle that is exacerbated during hard times. “I know the kinds of pressure you are under,” he said. Osborne is frequently

David Blackburn

“It started in Germany…”

Bugger the Bundesbank — that seems to be ECB President Jean-Claude Trichet’s current raison d’être. The ECB, together with other global central banks, yesterday agreed to provide dollar funding to ease the mounting liquidity crisis in European banks, largely caused by American banks curtailing interbank lending in anticipation of another crisis. This unorthodox action runs contrary to the wishes of the German Bundesbank, adding to the pre-existing strain between the ECB and the German establishment over bond purchasing, tension that was epitomised by the resignation of Jurgen Stark last weekend. Obviously, central banks do not take this action every day and it is yet another indication that crisis is now impending.

Thursday

Alex Massie

George Osborne’s Difficulty

Summed-up by the Economist in a single chart. When you consider that many people support spending cuts in principle but tend to oppose them when they target particular favourite programmes you may appreciate that the government faces a fairly acute political problem. That’s before you consider the practical difficulties of really cutting spending. In its way, all this is also a bleak testament to the consequences of a dozen years of Labour rule and, one might add, to the Tories’ belated conversion to restraining government spending.

David Blackburn

The last of England

Martin Vander Weyer’s column in the latest issue of the magazine is essential reading. It features five current stories from the business world. The Vickers report, Martin says, will merely offer the same poor service for consumers at a greater cost. Martin also notes, as he did two weeks ago, that American banks are winding down their lending to European counterparts in anticipation of a crash, and adds that American politicians are keen to paint Europe as the bogeyman for their financial ills, conveniently ignoring the failure of Obama’s hugely expensive stimulus. Martin also touches on unemployment and the Eurozone crisis. His final vignette is a parable for our troubled

David Blackburn

Sarko and Dave go to Tripoli

“This is your revolution,” said David Cameron to the mass of rapturous Libyans who welcomed both him and Nicolas Sarkozy in Tripoli this morning. Obviously this is a PR coup for the two leaders, who both face difficulties at home. But, although these were scenes of jubilation, both leaders were keen to say that the situation in Libya is still delicate. Gaddafi is still at large and there are reports that his supporters have drifted into the desert, where they are conducting a guerrilla campaign against rebel targets. This is of great concern to the National Transitional Council and its allies, who want to reopen Libya’s remote oil industry to

David Blackburn

Merkel & Sarkozy have only words

It was something of a mystery. Emergency conference calls about the future of the Eurozone were being made yesterday, but there was no news of those discussions. As it turned out, this was for the best of all possible reasons: there was no news to report. Angela Merkel and Nicolas Sarkozy announced no new measures to alleviate the sovereign debt crisis; rather, they merely declared “solidarity” with Greece and assured the markets that Greece would not be forced from the single currency. Their words seem to have assuaged the markets for the moment, but only the most brazen optimist would bet on the rally being long lived. Tests of confidence

Wednesday

James Forsyth

A brutal no score draw at PMQs

Cameron and Miliband went six rounds on the economy at PMQs. Miliband tried to portray Cameron as just another Tory who thinks that “unemployment is a price worth paying”. Cameron, for his part, wanted to paint the Labour leader as someone whose policies would send Britain tumbling into a sovereign debt crisis. At the end, it felt like a bit of a no-score draw. Interestingly, Cameron stressed that “every week and every month, we’ll be adding to that growth programme”. We’ll have to see whether he’s talking about more small-bore measures, or something bigger on infrastructure investment. Labour had a new tactic today, trying to fact-check all of Cameron’s answers

David Blackburn

Clegg sounds a dire warning on the economy

Nick Clegg gave a speech on the economy earlier this morning. As Tim Montgomerie notes, Clegg came close to admitting that the economy is nearing crisis. He said, “The economic context is much worse than before. Yes, facts have changed” and added that the “government is not blind to deterioration in economic environment”. These warnings tighten a knot in already sick stomachs; but, with the Eurozone mired in a crisis that is fast becoming existential, banks under mounting strain, rising unemployment, widespread talk of further Quantitative Easing and the very public internal debate in the coalition about the need for tax cuts, Clegg’s comments don’t come as a great surprise.  He also introduced

Tuesday

David Blackburn

Miliband: We can’t spend our way to a new economy

David Cameron and IDS have been promoting the Work Programme this afternoon and they reiterated that jobseekers must learn English to claim benefits if their language difficulties are hampering their job applications. It’s another indication of the government’s radical approach to welfare reform. Aside from that, the main event in Westminster today was Ed Miliband’s speech to the TUC. Miliband was widely heckled by the Brothers, especially when he told them: “Let me just tell you about my experience of academies as I’ve got two academies in my own constituency. They have made a big difference to educational standards in my constituency and that is my local experience of that.” The Tories

Jonathan Jones

Inflation target missed again

Today’s inflation figures remind us of the trouble the Bank of England will have if – as most analysts suspect – it embarks on another phase of Quantitative Easing. CPI inflation was 4.5 per cent in the year to August, and RPI at 5.2 per cent, both up a touch from July.  CPI inflation has now overshot the Bank of England’s 2 per cent target for 60 of the past 75 months. It has been at more than 3 per cent since the start of 2010. As a result of last month’s figure, Governor Mervyn King wrote his now-standard letter to George Osborne to “explain” why inflation is above the

Sunday

James Forsyth

A reminder of two of the political battles ahead for the coalition

If anyone had any doubts about how difficult the politics of banking reform and planning would be for the Conservatives, they’ll be dispelled by a glance at a couple of tomorrow’s front pages.  ‘Osborne to let banks off the hook—for now’ screams The Independent. This a reference to the Chancellor’s plans to consult with the banks on the conclusions of the Vickers report—which the government has seen but is officially published tomorrow morning. The political problem for Osborne is that anything other than the immediate implementation of Vickers’ recommendations will be seen as a favour to the banks. But pushing the reforms through now could undermine an already weak economy.

Fraser Nelson Fraser Nelson

Time for the QE gamble, again

It’s time to warm up the printing presses. When growth evaporates and governments feel politically unable to cut spending or raise taxes, there’s only one tool left: printing more money. We can expect more of it soon. As James says today, Osborne believes he has created the conditions where the Bank of England can do some more Quantitative Easing and it could start as early as next month; an unusual move, given how high inflation is. But the Bank is (as ever) forecasting a return to the 2 per cent target soon – and may now claim that economic weakness makes an undershoot likely. And so (the logic will run)

Friday

Fraser Nelson

Obama’s plan B: tax cuts

Washington, DC The clue is in the name. A stimulus is supposed to stimulate, and Obama’s first attempt stimulated nothing more than the American national debt. So he’s trying again, with a $447 billion package (he’s careful not to call it a “stimulus”) in what will probably be his last roll of the pre-election dice. But $245 billion of it would be debt-financed tax cuts.  Not sales tax cuts, the type of which Ed Balls is prescribing for Britain. It’s all payroll tax cuts: reducing the tax on jobs in the hope of encouraging more hiring. Given the temporary nature of the tax cuts, I doubt this will be the

Wednesday

Fraser Nelson

50p tax isn’t just hurting the economy, but Treasury revenues too

So where were these 20 economists when Gordon Brown first set the 50p trap for George Osborne? Then, Brown’s gamble was that the Shadow Chancellor was a political strategist with little interest or expertise in economics, so he’d be unlikely to work out just how much the 50p tax would lose the Exchequer, or guess it could be more than £3 billion a year – with further, less calculable damage on Britain’s reputation as a home for entrepreneurs. This was when we needed those economists. At the time, all Osborne had to go on was the IFS which calculated it would cost £800m – assuming the rich were no more

James Forsyth James Forsyth

A growing argument about the 50p rate

With the Eurozone and American economies both at risk of a double dip recession, how to get the British economy moving again is going to be one of the defining political arguments of the autumn. A first salvo in that fight has been fired this morning with a letter to the FT from 20 economists calling for the immediate scrapping of the 50p rate because of the harm that it is doing to the economy as a whole. This letter will, one suspects, be privately welcomed by the Chancellor who is looking for ways to, at the very least, cut the rate. He has become increasingly convinced that it is

Sunday

James Forsyth

Darling lifts lid on Brown’s chaotic government

Tieless, Alistair Darling appeared on Marr this morning to discuss his memoir. As with so many of these New Labour autobiographies, there was the strong whiff of a therapy session. At one point, Darling said “if Gordon is listening to this” before remarking that he still felt a huge amount of “residual loyalty” to him. It is not news that the Brown government was dysfunctional. But it was striking that Darling did not dissent when Marr suggested that under Brown, Labour had – collectively – not been fit to govern. In the serialisation of the book in The Sunday Times, the detail that stands out to me is that Darling and David Miliband met

Friday

David Blackburn

EU bans Syrian oil imports

The EU has banned imports of crude oil from Syria. This is being touted as a major success for the EU, displaying the ability of governments to act collectively. Oil sanctions on Syria should, theoretically, impede President Assad: 95 per cent of Syria’s oil is exported to Europe, worth roughly £3bn a year. Germany and Italy are the premier destinations. This is a welcome move against a brutal tyranny, but the embargo is not the total success that it might have been. Italy was stalling earlier in the week, trying to defer the deal’s implementation until 30th November 2011, when existing contracts expired. Other European countries were pushing for a more

James Forsyth James Forsyth

Lagarde sets about the Eurozone

When Christine Lagarde took over the IMF top job, it was widely assumed that she would simply continue her predecessor’s policy of almost unconditional support for Eurozone bailouts. But Ken Rogoff, the IMF’s former chief economist, has detected a hardening in the IMF’s approach. He thinks that Lagarde’s call for, as he puts it, “forced recapitalization of Europe’s bankrupt banking system” signals a new, tougher approach towards the euro-zone. As Rogoff says, the IMF’s previous approach to the euro-zone simply wasn’t credible. The idea that Spain was really at no more risk of a default than Germany was risible. But, as Rogoff argues, there won’t be a full restoration of

Justin Marozzi

Libya’s next battle

Tripoli Two months ago Mazin Ramadan, senior advisor to Ali Tarhuni, the oil and finance minister recently promoted to deputy prime minister, was, in his own words, fire-fighting a liquidity crisis in Benghazi. Today, after the first tranche of the £1.8 billion frozen Libyan dinars sitting in Britain finally reached Libya after five months, he’s feeling more relaxed. It arrived in the nick of time. Another reason for his bonhomie? He says he’s just received $300 million in frozen assets released by the US. The most immediate challenge is tomorrow. Literally. The million dinar question is whether Tripoli goes back to work on Saturday. On paper it’s the first day