After the election shock, big questions

May 8, 2015

Britain's PM Cameron arrives with his wife Samantha at Number 10 Downing Street in London

A surprisingly decisive election win for Britain’s Conservative party has cheered financial markets and will probably allow Prime Minister David Cameron to govern unencumbered by coalition partners.

Whether he gets past the magic number needed for an outright parliamentary majority or falls marginally short (final results will take some hours to dribble in yet) the overwhelming temptation will be to go it alone.

But a tumultuous night raises a number of profound questions about Britain’s future.

Given the Scottish Nationalists’ stunning triumph, all but wiping the opposition Labour party out north of the border, can Scotland stay part of the UK in the long-term and have the Conservatives let the genie out of the bottle by bigging up the SNP and stoking English nationalism during the campaign?

Former SNP leader Alex Salmond, who will head his party in Westminster, was quick to allude to that, saying Cameron – the UK premier – had no legitimacy in Scotland.

The Scots voted against independence in a referendum only last year but must surely expect a repeat in the next few years now the SNP can argue that their country has again by saddled with unpopular Conservative rule by English voters.

The economics of independence may be dubious but momentum like this is hard to stop. It will certainly by high in Cameron’s in-tray and both he and finance minister George Osborne said they would look to reunite the country as a matter of urgency.

An in-out EU referendum, promised by the Conservatives in 2017, is still likely to come first and with anti-EU UKIP failing to convert votes into seats the pressure on Cameron to get meaty concessions from the EU may ease a little. Moreover, by exceeding expectations he is better placed to command loyalty within his party, many of whom are deeply eurosceptic.

Labour faces an almost existential crisis. Wiped out in Scotland where it was previously dominant, it will have to move closer to the political centre to have a hope of winning more support in England.

That seems likely to spell the end for leader Ed Miliband who had staked out more left-wing ground. He may not last the day. Labour’s most successful leader, Tony Blair, said some months ago that a traditional left versus right battle would have “the traditional result” – the Conservatives would win.

The other question is how did the pollsters get it so wrong? Even on election day, they all said you couldn’t slide a cigarette paper between the two main parties.

Sterling leaped to its highest in over two months against the dollar, gaining 1.6 percent on the day to $1.5486 after rising as high as $1.5523, its highest since Feb. 26.

No sign of a breakthrough in Greek talks with Athens refusing to cut pensions or ease worker layoffs to meet their creditors’ demands, dimming prospects of progress next week towards securing desperately needed financial aid.

Despite efforts by European Commission President Jean-Claude Juncker to coax Prime Minister Alexis Tsipras into moving on two key conditions for releasing EU/IMF bailout funds, the Greek government said lenders could not expect Athens to make all the concessions although it faces an IMF bill of 750 million euros next week that it is not clear it can meet.

Athens wants euro zone finance ministers to recognise progress towards an agreement when they meet on Monday in order to give the European Central Bank leeway to let it sell more short-term debt to Greek banks to stay afloat in the short-term.

But the ECB is unlikely to make such a move unless the euro zone ministers set out a very strong prospect of releasing frozen bailout funds. Tsipras will take questions in parliament this morning.

Data just out showed German exports climbed in March for a second consecutive month but industrial output dipped, sending mixed signals about Europe’s largest economy at the end of the first quarter.

A U.S. operation in Yemen has killed the senior Al Qaeda figure who issued the claim of responsibility for the Charlie Hebdo attack in Paris, according to U.S. sources familiar with the matter.

Saudi Arabia offered a five-day humanitarian truce in Yemen if Houthi rebels stopped fighting but a Saudi-led coalition then said it would hit the Shi’ite militia hard following attacks in border areas.

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