Skip to main content

The skin of their teeth

As Congress prepares to vote on he increase in the US debt ceiling, it is salutary to reflect on the way that a routine Congressional vote has very nearly turned into an existential crisis for the United States itself.

We can hope that the vote marks the nadir of the US crisis, and indeed there are some signs that, despite recent disappointing growth numbers, America may now be turning the corner.

In the UK too, several indicators are showing some improvement: in particular the Coalition is currently ahead of its plans in the process of deficit reduction. The determination of the British government has been rewarded by Gilts now trading inside US Treasuries for the first time in many years. The political horsetrading in the UK has actually led to progress in deficit reduction, a sharp contrast to the US which still faces a rising tide of red ink, unless the growth outlook improves soon and the politicians continue to bicker.

So if the US has indeed avoided the catastrophe of default, then we may now see some stabilization on that side of the Pond. Yet in Europe, there remain significant issues to address before the crisis can be said to be over. The collapse of the Cypriot government is merely the latest manifestation of the way that the market is testing to destruction the weaknesses in the Euro system.

The solution is increasingly clear: a much deeper monetary union, including a transfer union is increasingly likely. This, of course, raises significant political issues, particularly in Germany, but I have been struck in recent weeks by the readiness of German policy makers to commit to this deeper union. For the UK, that may mark the parting of the ways with the EU, at least in the short run.

Yet, if the Euro is ultimately successful, it will be yet another European project that the UK initially opposes outright, then reluctantly agrees that others may participate in, if the they wish, although the UK will not, and ultimately which the UK still finds it imperative to join. It may be a decade or two away, but short of the break up of the EU- which many Tories openly advocate- I suspect that the pattern will indeed repeat itself and that far from enjoying our isolation, we will chose once again to engage with the EU, albeit a decade or two late..

However, as the Americans avoid default by the skin of their teeth, we are still not out of the woods- in Europe or America- yet.

Comments

Anonymous said…
"several indicators are showing some improvement: in particular the Coalition is currently ahead of its plans in the process of deficit reduction."

Which indicators? How is the coalition ahead of its deficit plans? Osborne borrowed more this June than last, gdp growth is well below OBR forecasts and the manufacturing PMI this morning indicates recession.

Popular posts from this blog

Concert and Blues

Tallinn is full tonight... Big concerts on at the Song field The Weeknd and Bonnie Tyler (!). The place is buzzing and some sixty thousand concert goers have booked every bed for thirty miles around Tallinn. It should be a busy high summer, but it isn´t. Tourism is down sharply overall. Only 70 cruise ships calling this season, versus over 300 before Ukraine. Since no one goes to St Pete, demand has fallen, and of course people think that Estonia is not safe. We are tired. The economy is still under big pressure, and the fall of tourism is a significant part of that. The credit rating for Estonia has been downgraded as the government struggles with spending. The summer has been a little gloomy, and soon the long and slow autumn will drift into the dark of the year. Yesterday I met with more refugees: the usual horrible stories, the usual tears. I try to make myself immune, but I can´t. These people are wounded in spirit, carrying their grief in a terrible cradling. I try to project hop

Media misdirection

In the small print of the UK budget we find that the Chancellor of the Exchequer (the British Finance Minister) has allocated a further 15 billion Pounds to the funding for the UK track and trace system. This means that the cost of the UK´s track and trace system is now 37 billion Pounds.  That is approximately €43 billion or US$51 billion, which is to say that it is amount of money greater than the national GDP of over 110 countries, or if you prefer, it is roughly the same number as the combined GDP of the 34 smallest economies of the planet.  As at December 2020, 70% of the contracts for the track and trace system were awarded by the Conservative government without a competitive tender being made . The program is overseen by Dido Harding , who is not only a Conservative Life Peer, but the wife of a Conservative MP, John Penrose, and a contemporary of David Cameron and Boris Johnson at Oxford. Many of these untendered contracts have been given to companies that seem to have no notewo

Bournemouth absence

Although I had hoped to get down to the Liberal Democrat conference in Bournemouth this year, simple pressure of work has now made that impossible. I must admit to great disappointment. The last conference before the General Election was always likely to show a few fireworks, and indeed the conference has attracted more headlines than any other over the past three years. Some of these headlines show a significant change of course in terms of economic policy. Scepticism about the size of government expenditure has given way to concern and now it is clear that reducing government expenditure will need to be the most urgent priority of the next government. So far it has been the Liberal Democrats that have made the running, and although the Conservatives are now belatedly recognising that cuts will be required they continue to fail to provide even the slightest detail as to what they think should guide their decisions in this area. This political cowardice means that we are expected to ch