‘Radical’ Cameron joins in Davos Germany-bashing
It was a far bolder speech than I expected from the PM to the capital of capitalism. He described himself as a “monetary radical”, which is a reference to the £275 billion of QE, and presumably the soon-to-be launched credit easing policy. It was a contrast with the European Central Bank and its lack of bazooka. (though the consensus here is that the ECB has fired its bazooka through dumps of practically free three-year loans to Europe’s banks – the LTRO).
It was pretty radical to propose by name that the Eurozone needs eurobonds, as the PM did today. Angela Merkel was pretty sarcastic about Germany footing the bill for this policy which would treat Eurozone debt as one, and at a stroke collapse excessive debt interest rates, at the cost of raising them for Germany.
Well the PM joined in the not-so-subtle undercurrent of Germany-bashing that is emerging at this Davos. Germany’s approach is being critiqued left, right, and centre- from bankers, respected economists, the IMF and more subtly, other world leaders.
As the PM said of how to make the single currency work:
“You need the support of single currency partners – and as Christine Lagarde has set out, a system of fiscal integration and risk sharing, perhaps through the creation of Euro area bonds to make that support work.
“As Mario Monti has suggested, the flip side of austerity in the deficit countries must be action to put the weight of the surplus countries behind the Euro.
“I’m not pretending any of this is easy. These are radical, difficult steps for any country to take. Knowing how necessary but also how hard they are is why Britain didn’t join the Eurozone.”
The PM also bashed Brussels over the Tobin Tax, also a favourite of Angela Merkel. He said it was “madness” to even think about at a time when the EC itself says it will cost €200bn and 500,000 jobs (importantly the Commission completely denies that it has said this about its current plan, and for the Financial Transaction Tax).
For Number 10, the PM is using economic diplomacy to gently pressurise Berlin to move, going with the grain of pronouncements from the Italian Prime minister and The IMF’s Christine Lagarde.
Will Germany listen? I suspect that they will be sceptical of advice from the leader of an economy which has barely grown in nearly a year and a half. I think Berlin thinks its tough love message is working, and that the actions of the ECB have been underrated.
Mr Cameron was again on strong form in imploring the world’s investors to pour money into Britain. He is always rather good at these things, and would point to the very positive noises being made from China as a tangible example of its success.
But make no mistake, the PM intends to use the Olympics and Diamond Jubilee as a giant trade showcase for Britain in the world economy. Interesting, South Africa did something similar at Davos 2010 ahead of the World Cup. South Africa absolutely blitzed the place with marketing, models, free scarves and ministers.
The UK’s efforts, perhaps mindful of austerity, are a little more modest.
There are 10 comments on this post
Typical Cameron flim-flam, playing to his anti-European back benchers. Who else would think that publicising comments of this kind was likely to influence German policy? Theirs is a successful economy. Ours isn’t. He’s basically telling the Germans to bear the whole problems of massive overspending & irresponsible fiscal & economic management of the whole of the Eurozone on their shoulders, while he proposes to sit in this semi-detached island carping & criticising but providing no help whatsoever. What stupendous, crass arraogance! If I was Merkel, I’d point out to him that he’s running a self-defeating economic policy which hasn’t lived up to its hype. He could have made a more thoughtful speech about how to manage western indebtedness down in a way that is manageable, avoids damaging economic growth and leads to a more equal distribution of global wealth. But he’s only interested in the presentational effect of what he says on Tory backbenchers, Times, Express, Mail & Sun readers.
Germany enjoys a successful economy at the expense of the poorer Eurozone countries – just as they planned. As an economy reliant on exporting their beautifully made cars and excellent engineering generally, Germany long suffered because the Deutschmark was too strong. What better idea than to set up a new currency which, at a stroke, sent their profits through the roof (German citizens recently enjoyed a generous tax rebate FFS!) whilst sending Greece and Italy and Portugal et al (all countries who were never in a million years going to be able to meet the criteria for being in the Euro) into penury. The Euro as we know it was cooked up by those models of probity Helmut Kohl and Francois Mitterand, men fully deserving of a length prison sentence. God bless Gordon Brown for keeping us out!
Not at the expense of. I won’t reply to your anti-EU rant. But the reason why the Germans have done well is because they’ve managed their economy sensibly, building a genuinely balanced economy which produces goods other countries want to buy. The Germans didn’t join the Euro as part of a grand economic plot to dominate the weaker European countries through devaluing their currency, they did it because they believe in a European economic union as a result of their past & a conscious decision not to raise the nation state above the wider european community. That the collapse of the world economy (in which the UK played no small a part based on our spectacularly unbalanced economy)has assisted the Germans is far more due to their sound ecomoic management & the inadequate economic management of the PIIGS than some heinous plot. And ad hominem abuse is just a convenient device to wash over the truth.
One thing I’m curious about: We are told that our current decline is largely a result of the eurozone problems. Is it not in our interest, therefore, to do more than just lecture the rest about what they should do?
I know it would be unpopular with his back benchers, but Cameron should be more enthusiastic about IMF money, including Britain’s, sorting the situation out.
He might find the rest of Europe took more notice of him too. After all it’s a bit tough to be lectured on how to sort out a problem by the one person who wants to do nothing to help.
Germany has benefited more than most from the Euro. Had it been outside the Euro its exchange rate would have risen and muffled its exports.Cheap credit in the Euro and lax borrowings, not challenged by Germany until lately, have let the Euro members buy many of Germany’s exports.Germany should recognise this and play its part as a surplus economy.
You are right , but have you ever seen the Germans pay back something .
They don’t even pay the war damages they were supposed to pay to Greece ( around 15 billions US$)
money which could be quite useful nowadays.
They were also very happy to enjoy being part of the EU when the reunification happened but they permanently suffer from memory losses.
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The only way to save the Euro is for Germany to leave it.
A new DM would appreciate and Germany would take some pain, but nothing like what it would should it accede to the bonkers idea of Eurobonds.
All the rest would see a devaluation and the bondholders’ haircut would happen automatically, but strategically, this would NOT trigger a default, so no massive CDS liabilities.
Other, stronger countries might then follow Germany, leaving a peripheral club of Ireland, Spain, Portugal, Germany and Greece with a 50% weaker currency and the chance to grow out of their troubles.
What will not work is the ECB printing short term money, giving it to banks to lend to Governments and then finding in three years time the banks want re-paying. Where’s that cash going to come from?
Like the rest of the EU project, the Euro was an idea dreamed up by politicians, about politicians, and for the benefit of politicians.
If they had spent 10 minutes considering the economics (and a first year economics student could have helped them) they would have realised it is a deeply, deeply, flawed project.
And these are the people who think a United Europe is a really great idea. I have always trusted the judgement of the people more than these strutting clowns – and they have always rejected these grandiose schemes when they been asked.
Which is precisely why – they seldom are.
You are totally correct on every point!