Opinion

The Great Debate

from Anatole Kaletsky:

How EU politics pushed Merkel to lift Germany’s austerity policies

German Chancellor Merkel and Luxembourg's Prime Minister Juncker hold a joint news conference after a meeting in Luxembourg

Matteo Renzi, the prime minister of Italy who took the revolving presidency of the European Union this week, seems to be the sort of man that Napoleon was referring to when he reputedly said that the key qualification he sought in recruiting a general was good luck.

Renzi become prime minister without even needing to win an election because Silvio Berlusconi and all other rivals self-destructed. He took power just after Italy passed the lowest ebb of its economic fortunes. In May, he was rewarded for his good fortune by Italy’s voters, who anointed him with a strong democratic mandate in the same European elections that discredited almost all Europe’s other national leaders. Now he is taking the helm in Europe, as an economic recovery is starting and the European Central Bank is swinging decisively in support of growth.

But even a politician as lucky as Renzi could not have counted on his latest and most unexpected windfall: the unintended consequence of last week’s failed campaign by British Prime Minister David Cameron to stop the appointment of Jean-Claude Juncker as head of the European Commission.

Italian PM Renzi talks during a joint news conference with European Commission President Barroso at the end of a meeting at Villa Madama in RomeAnalysis of Cameron’s crushing defeat in the 26-to-2 vote by Europe’s national leaders to appoint Juncker has focused on its implications for British politics and for Britain’s future in the EU. But this event was actually less significant for Britain than for Europe as a whole, specifically for the Italian EU presidency that started on July 1.

For Cameron and Britain, the embarrassment of losing the Juncker battle was more apparent than real. The outcome was predictable once the British press started smearing Juncker with claims about alleged Nazi parentage. From that moment on, Chancellor Angela Merkel was pressured by German public opinion to give Juncker her unconditional support and secure a near-unanimous coalition of Europe’s leaders to head off Cameron’s attacks.

from Nicholas Wapshott:

Fighting for the future of conservatism

Britain's Prime Minister David Cameron delivers a speech to placard waving Conservatives during an European election campaign rally at a science park in Bristol

Establishment Republicans have been delighted by the victory of Thom Tillis, their favored candidate in last week’s North Carolina primary. After expensive advertising campaigns by establishment bagmen like the U.S. Chamber of Commerce and Karl Rove’s American Crossroads, mainstream conservatives believe they have a candidate who can beat Democrat Kay Hagan to win a valuable Senate seat in November.

Some commentators see Tillis’s triumph as a sign that other impending GOP primary races will also deliver electable candidates. Having watched the Senate slip from Republican grasp in 2012, as Tea Party candidates such as Todd Akin in Missouri, Christine O’Donnell in Delaware and Richard Mourdock in Indiana depicted the party as too extreme, they say the Tea Party is in retreat.

Not so fast. The experience of conservative parties elsewhere suggests that when pragmatists triumph over dogmatists, the dogmatists either regroup and go on to overwhelm the moderates, eventually making the party their own. Or they set up their own party -- and trounce the moderates at the ballot box.

from Nicholas Wapshott:

David Cameron takes on the tax havens

There is nothing more likely to spark anger than an unfair tax regime. The American Revolution was founded on it. So the discovery that some of the largest and most successful companies in the world -- among them Google, Apple, Amazon and Starbucks -- have legally minimized the tax they pay, sometimes to as low as zero, in many nations in which they earn the lion’s share of their revenue is causing considerable irritation.

The result was evident at the G8 meeting in Northern Ireland, where Britain’s conservative government, chairing the conference of the world’s richest nations, put making corporation tax fairer at the top of its agenda, after the civil war in Syria. David Cameron, who like most conservatives believes in low taxes, is in a bind.

In an attempt to reduce public borrowing he is imposing high personal taxation on the Brits -- lifting “value added” consumption tax to a record  20 percent -- but finds that many of the most profitable companies operating in Britain are dodging taxes altogether. He thinks it is unfair. And so do his voters. He is under intense pressure to deliver a solution or he can expect to be turfed out of Downing Street.

from Anatole Kaletsky:

When illogical policy seems to work

It’s cynical, manipulative and hypocritical – and it looks like it is going to work. How often do you hear a sentence like this, to describe a government initiative or economic policy?  Not often enough.

The media and a surprisingly high proportion of business leaders, financiers and economic analysts seem to believe that policies which are dishonest, intellectually inconsistent or obviously self-interested in their motivation are ipso facto doomed to fail or to damage the public interest. But this is manifestly untrue. The effectiveness of public policies and their ultimate desirability is in practice judged not by their motivations, but by their results.

Which brings me to the real subject of this column: the improving outlook for the world economy and why many economists and financiers cannot bring themselves to acknowledge it. Let me begin with a striking example anticipated in this column back in March: the boom in house prices and debt-financed consumption that the British government is pumping up in preparation for the general election in May 2015.

For Russia, Syria is not in the Middle East

Russian President Vladimir Putin meets with (clockwise, starting in top left.) U.S. Secretary of State John Kerry, British Prime Minister David Cameron, next Israeli Prime Minister Benjamin Netanyahu and U.N. Secretary-General Ban Ki-moon. REUTERS/FILES

A string of leaders and senior emissaries, seeking to prevent further escalation of the Syria crisis, has headed to Moscow recently to meet with Russian President Vladimir Putin. First, U.S. Secretary of State John Kerry, then British Prime Minister David Cameron, next Israeli Prime Minister Benjamin Netanyahu and now, most recently, U.N. Secretary-General Ban Ki-moon These leaders see Russia as the key to resolving the Syria quandary.

But to get Russia to cooperate on any stabilization plan, the United States and its allies will have to take into account Russia’s significant interests in the Mediterranean region.

Britain’s austerity experiment is faltering

It was the Welsh sage Alan Watkins who remarked that a budget that looked good the day it was delivered to the British Parliament was sure to look terrible a week later, and vice versa. The avalanche of new information dumped by the Treasury is simply too much to grasp at a single sitting, and governments tend to bury bad news in a welter of statistics. And so it proved with finance minister George Osborne’s budget served up last week.

The immediate headlines stressed that rich Brits would pay less income tax – down from 50 percent to 45 percent – but it only took a day before even traditional Conservative cheerleaders like the Daily Mail were condemning Osborne for funding tax breaks for bankers and billionaires by stealing from those living in retirement. The paper’s cover screamed: “Osborne picks the pockets of pensioners.”

Osborne insists he is sticking to his “Plan A” to reduce the public deficit by sharply cutting state spending by 25 percent over the five-year parliament and imposing severe austerity. Because he believes his “Plan A” is on target, all he needed was a touch on the tiller. He therefore designed his budget to be fiscally neutral – that is, for every tax cut there was a corresponding tax increase. He put up tobacco and alcohol duties and sliced a little off corporation tax.

Should Obama mimic David Cameron’s austerity?

By Nicholas Wapshott
The opinions expressed are his own.

In medieval times, a key member of a monarch’s retinue was the food taster, a hapless fellow who ate what his master was about to eat. If the taster survived, the food was deemed safe for the king’s consumption. President Obama has a taster of sorts in David Cameron, the British prime minister, who has embarked upon an economic experiment that echoes the recipe of wholesale public spending cuts and tax hikes needed if both sides in Congress are to agree to raising the federal government debt ceiling. How the British economy is faring offers Obama an idea of what a similarly radical policy of cutting and taxing here would mean to the American economy.

Cameron’s election in May 2010 coincided with the start of the Greek debt crisis. The Bank of England governor Mervyn King warned him that the public debt in the UK was so large that Britain, too, might see its lending become impossibly expensive, so Cameron decided that there was no time to lose in putting the fiscal books in order. He decided to slash public spending by 25 per cent over four years and immediately raise value added tax on goods and services from 17.5 to 20 per cent. Such a radical remedy found favor with the rump of British Conservatives who felt that Margaret Thatcher’s free-market, small government, “sound money” policies of the Eighties had not been pressed to their limit. In turn, Thatcher’s prescription to reduce the size of the state derived from her favorite thinker Friedrich Hayek, the author of “The Road to Serfdom,” who believed like many Tea Party supporters that government intervention inevitably leads to tyranny.

Cameron’s experiment in applying a radical cure to the British economy caught the attention of a number of conservatives here, among them George W. Bush’s speechwriter Michael Gerson, who wrote in the Washington Post, “If Cameron’s approach works — dramatically cutting deficits without stalling economic growth — it will be an obvious, powerful example for America.” “If only the Obama administration and the U.S. Congress had been so courageous. Instead, they are choosing to put off these big decisions,” moaned Matthew Bishop, New York bureau chief of the Economist, in a piece co-authored with Michael Green in the Wall Street Journal. Even Treasury Secretary Tim Geithner thought the British experiment worth trying. “I am very impressed, as one man’s view looking from a distance, at the basic strategy [Cameron] has adopted,” Geithner told the BBC.

from The Great Debate UK:

Cameron tasked with changing Brits’ expectations

-- Mark Kobayashi-Hillary is the author of several books, including ‘Who Moved my Job?’ and ‘Global Services: Moving to a Level Playing Field’. The opinions expressed are his own --

After thirteen years, it’s all over. The New Labour project is dead. Or is it? Tony Blair brought British politics to the centre-ground and ensured that a single party could support free-market economic policies as well as social justice.

And that’s what most people want today, a government that can help the citizen without hindering the economy through the dogma of dated ideology. The old notion of socialists waging war on small-government-right-wingers feels somehow quaint. Clearly Tony Blair knew that David Cameron would be his successor in the New Labour project, but nobody told Gordon Brown.

In Britain, a new PM is waiting

Britains opposition Conservative Party Leader, David Cameron, speaks at the Confederation of British Industry (CBI) conference in London November 23, 2009. REUTERS/Toby Melville

global_post_logoMichael Goldfarb serves as a GlobalPost correspondent in the United Kingdom, where this article first appeared.

The press was summoned early one recent morning to Chatham House, Britain’s leading foreign affairs think tank, to hear the thoughts of Conservative leader David Cameron on Britain’s national security. As Cameron is likely to become prime minister later this spring, attendance was high.

Anyone in the audience who, like me, thought they would hear a talk about his grand strategy for how to deal with threats to Britain’s national security in these extremely insecure times was disappointed. Cameron, bright and confident, spent most of his brief remarks outlining how he intended to change the internal decision making of government on national security issues rather than outlining a new approach to Iran or China.

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