Tuesday, 2 December 2008

Brown: A Prophet Without Honour in Anyone Else's Country

The United Kingdom will not be allowed to default. It is too large an economy to be treated as its Prime Minister treated Iceland. And its default would possibly damage other member states of the European Union more than is acceptable. But unless the desperate campaign mounted by our government to try and force the core of Europe to finance the UK's eleven year debt binge succeeds it is going to be subjected to strictures that will humble, and sharply cut living standards. Public spending will have to be dramatically cut back; taxes will have to rise greatly - the standard IMF et al., bail-out package. And the supervision will be close and galling. Inevitably the regime, the thousand year, post-democratic New Dawn Project, will come to an end.

The measure of how close is the endgame is the markets' assessment of what they need to take the risk of lending to the UK; and the virulence of the attacks upon the German Chancellor for leading, from a position of strength, all those member states, also in some position of strength with reasonable levels of debt (household debt, not just public debt), in a principled and sensible rejection of massive borrowing and unfunded spending.

Centre-left parties and media are spewing torrents of abuse and false analysis in the effort to re-establish the 'keynesian' consensus and save their fellow member of the Socialist International, the Labour Party, from humiliation and loss of power.

Mrs Merkel enjoys, fortunately, the support of well over ninety percent of her Party, and most of her countrymen and women. And that of most other member-states too; including France, despite the rhetoric, that has not yet instituted extraordinary stimulus measures (but will do so, they claim, in coming weeks); including Italy that, despite its public debt problems, has a population with savings in solid gold, neatly stacked under the bed and whose stimulus is just 30 billion euros worth of bank recapitalisation to bring perfectly sound banks up to EU norms. The east has either obtained its bailout and is already under tutelage, or in decent enough shape, like Poland.

There's a lot of talk, from the left, even some conviction from the old European free trade area countries, but deep in their continental European hearts, they know that Brown is wrong - and mad.


Nick Drew said...

HG, any references for virulen(t) attacks upon the German Chancellor ?

have been busy & missed these

hatfield girl said...

WSJ - Merkel's budget course draws fire.

Der Spiegel - most of the cover page. They have a good press round up The world from Berlin.

Look at the reports on the reopening of the security talks between NATO and Russia too ND. Miliband really is out of the loop. Well, our government really.

Nick Drew said...


Sackerson said...

Heard on the news yesterday that default insurance premiums (i.e. margin on credit default swaps) for UK govt bonds now 1%, significantly higher than for other EU countries - except Italy at 1.5%.

hatfield girl said...

What a state to have got ourselves into when risk lending to us is viewed as poorly as lending to Italy S.