UK News
Insights from the UK and beyond
from The Great Debate UK:
Thanks, Greece
--Laurence Copeland is a professor of finance at Cardiff University Business School. The opinions expressed are his own.--
The euro zone crisis has been a piece of luck for Britain. Imagine what would have happened without it.
In the immediate aftermath of Lehman, Britain’s position looked utterly hopeless. With a budget deficit of world-war proportions, and facing the cost of refinancing what had been two of the world’s biggest banks and were now two of the world’s biggest bankruptcies, the future for us at the end of 2008 looked dire.
Since then, our prospects have hardly been transformed, but we have at least been given a few years breathing space to get our affairs in order. For that blessing, we owe thanks to the Southern Europeans.
from Hugo Dixon:
UK should get on front foot with City
It is perhaps too much to expect Britain’s Conservative-led government to lead any initiatives on Europe, such is the orgy of self-destruction in the party over whether the UK should stay in the European Union. But, insofar as David Cameron manages to get some respite from the madness, he should launch a strategy to enhance the City of London as Europe’s financial centre.
Britain has in recent years been playing a defensive game in response to the barrage of misguided financial rules from Brussels. It now needs to get on the front foot and sell the City as part of the solution to Europe’s problems. The opportunity is huge both for Britain and the rest of Europe.
from The Great Debate:
Stubborn national politics drag down the global economy
Four years ago world leaders, meeting in the G20 crisis session, agreed they would all work to move from recession to growth and prosperity. They agreed to a global growth compact to be delivered by combining national growth targets with coordinated global interventions. It didn’t happen. After the $1 trillion stimulus of 2009, fiscal consolidation became the established order of the day, and so year after year millions have continued to endure unemployment and lower living standards.
Only now are there signs that the long-overdue shift in national macro-economic policies may be taking place. The new Japanese government is backing up a "minimum inflation target" with a multi-billion-dollar stimulus designed to create 600,000 jobs. In what some call the “reverse Volcker moment,” Ben Bernanke has become the first head of a central bank for decades to announce he will target a 6 percent level of unemployment alongside his inflation objective. And the new governor of the Bank of England, Mark Carney, has told us that "when policy rates are stuck at the zero lower bound, there could not be a more favorable case for Nominal GDP targeting.” Side by side with this shift in policy, in every area but the Euro, there is also policy progress in China. It may look from the outside as if November’s Communist Party Congress simply re-announced their all-too-familiar but undelivered wish to re-balance the economy from exports to domestic consumption, but this time the promise has been accompanied by a time-specific commitment: to double average domestic income per head by 2020.
from Hugo Dixon:
Brexit could come before Grexit
Investors have been obsessed with the notion of “Grexit” - Greece’s exit from the euro. But “Brexit” - Britain’s exit from the European Union - is as likely if not more so. The country has never been at ease with its EU membership. It refused to join its predecessor, the European Economic Community, in 1957; it was then blocked twice from becoming a member by France’s Charles De Gaulle in 1960s; and shortly after it finally entered in 1973, it had a referendum on whether to stay.
The euro crisis has put further pressure on this difficult relationship. David Cameron’s Conservative Party, the governing coalition’s dominant group, delights in pointing out the flaws in the single currency. The party’s eurosceptics feel vindicated because they have long believed that monetary union was only possible with political union.
from Breakingviews:
UK’s problem: it’s the best in Europe
By Ian Campbell
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
UK GDP stalled in the fourth quarter, contracting by 0.2 percent. That’s bad. But which major west European economy will perform best in 2012? It’s the UK again, the IMF predicted this week.
from Breakingviews:
The real UK plan B: protecting against euro chaos
By Hugo Dixon and George Hay
The authors are Reuters Breakingviews columnists. The opinions expressed are their own.
Pundits say Britain needs a plan B to boost growth. What it really needs is a contingency scheme to handle a euro explosion. The central planks should be for the government to keep adequate fiscal firepower in reserve to handle a crisis and to shore up the country’s banks.
from The Great Debate:
The perils of protectionism
By Gordon Brown
The views expressed are his own.
Next week's 2011 G20 meeting has the power to write a new chapter in the response to the economic downturn. But every day, as nations announce currency controls, capital controls, new tariffs and other protectionist measures, the G2O’s room for maneuver is being significantly narrowed. Already the cumulative impact of a wave of mercantilist measures is threatening to turn decades of globalization into reverse, returning us to the economic history of the 1930s, and condemning at least the western parts of the world to a decade of low growth and high unemployment.
Three years ago when the financial crisis first hit, the G2O communiqués were explicit in warning of the dangers of a new protectionism. Led by the head of the World Trade Organization (WTO), Pascal Lamy, we embarked on a forlorn attempt to use the crisis to deliver a world trade deal -- and were frustrated by an irresoluble dispute on agricultural imports between two countries, India and the USA. But now, in the absence of any co-ordinated global action, member countries have been retreating into their national silos -- and the trickle of protectionist announcements threatens to become a flood. Switzerland led costly action to protect its overvalued currency and has been followed by currency interventions in Japan (with perhaps more to come), India, Indonesia, and South Korea. Brazil, which had itself warned of currency wars, then imposed direct tariffs on manufactured imports -- a hefty car tax designed to protect its own native auto industry against emerging market imports. Other countries are now considering mimicking them. Capital controls are also now in vogue, and of course the U.S. Senate has just voted to label China a “currency manipulator.”
No-one comes out well in Ireland’s political posturing
Poker, chess, chicken. Pick whichever analogy you like: there’s a high stakes game being played in Irish politics and it’s not a game their international partners much like. Since Ireland said on Sunday it would be asking for help from the EU and IMF – little more than two days ago, though it seems like a lifetime — the pieces of the political game have moved almost without cease. Ironically, though, the net result may be little different to what was forecast before the tumultuous events of the past 48 hours: a four-year austerity plan outlining 15 billion euros in savings, a by-election Fianna Fail are set to lose, the harshest budget on record on December 7, and an election in early 2011.
It started with the government’s bailout appeal. What should have led to a few weeks of EU/IMF negotiations was immediately overshadowed by the surprise move of the junior coalition party, the Greens, who stunned voters – and, it appears, their partners Fianna Fail themself, itself, when it announced it would not continue to be part of the government once 2011 budget measures were implemented.
from MacroScope:
It’s all Germany’s fault
It is fairly commonplace at the moment for U.S. and UK financial analysts -- what continental Europeans call the Anglo-Saxons -- to predict the collapse of the euro zone, a project they were mostly sceptical about in the first place. MacroScope touched on this on two occasions in March.
The latest foray into this area comes from Alan Brown, global chief investment officer at the large UK fund firm Schroders. But he does it with twist, blaming what he sees as the eventual collapse of the euro zone not on the structure itself nor on the profligacy of peripheral economies, but on Germany's response to the crisis.
Is powerful Mandy talking up the euro?
When Prime Minister Gordon Brown reshuffled his cabinet last week, fending off a challenge to his authority, a significant outcome was the creation of one of the most powerful ministerial jobs Britain has seen in years.
Peter Mandelson, a former European commissioner who has twice served in British governments in the past and twice been forced to resign, was reconfirmed as secretary of state for business, but also given greatly expanded authorities that make him a powerful if unofficial number two to Brown.
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The Wall
