The Great Debate UK
-Laurence Copeland is a professor of finance at Cardiff University Business School and a co-author of “Verdict on the Crash” published by the Institute of Economic Affairs. The opinions expressed are his own.-
The Governor of the ECB, Jean-Claude Trichet has raised interest rates by 0.25 percentage points – and quite right too. For us in the UK, blaming rising prices on temporary disturbances in the world’s commodity markets is a figleaf to hide the fact that we are actually embarking on a partial default-by-inflation. For Europe, it is a different story. For one thing, the Germany-Austria-Netherlands bloc is, if not booming, at least chugging along at a highly respectable rate, and as the ECB Governor said today in response to a question about the impact of the rate rise on Portugal, his job is to set interest rates for the Eurozone as a whole, not just for the benefit of one of its smallest and weakest members.
Sovereign bailouts are becoming routine and, for the media, a standard part of the ritual is to question whether the euro zone can survive these crises. There is one highly relevant question, however, which seems rarely if ever to be discussed.
Quite simply, it is not in my view a question of whether the euro zone can survive, but rather of what we mean by the death of the euro zone or, maybe, how it can be killed off without inflicting near-fatal damage in its death-throes.
The pig that is British property is furiously flapping its wings, but despite signs of a recovery in prices and activity, rest assured there will be no take-off.
The country, which witnessed a property bubble that made the U.S. seem sober and sensible in comparison, has seen prices fall by about 20 percent but still faces a tough recession, rising unemployment and serious short and long term questions about the price of financing.