Author: |Posted: 9:04 pm on 09/02/10
Category: Faisal Islam on Economics
My sense is that Germany and France are cooking up some sort of bailout for Greece behind closed doors ahead of Thursday’s European leaders’ summit in Brussels.
The official position of, for example, Christine Lagarde, the French finance minister is that ‘we trust the Greek authorities to take all the necessary measures to tackle their deficits’.
You can be sure, though, that something is being concocted, they may be going all out to avoid it being termed a bailout. read more
Author: |Posted: 6:12 pm on 04/02/10
Category: Faisal Islam on Economics
The end of Mervyn’s magic money creation had been heralded. It did not quite come today.
In truth, this is likely to prove the end of an extraordinary 11-month experiment. Right now though, understandably, the Bank of England needs to keep its options open. If the economy worsens, they want to be free to increase purchases of government bonds. If it’s better than expected, it may push on with beginning to withdraw this stimulus.
I’m convinced that at Threadneedle Street, they were shocked by the limpness of Britain’s exit from recession. They have been running their big computer model in the past weeks. When it reveals new economic forecasts next Wednesday, we are likely to see a marked downgrade to Britain’s economic prospects. read more
Author: |Posted: 6:40 pm on 03/02/10
Category: Faisal Islam on Economics
One economics buff colleague of mine suggested a few years back that the country be run by a committee of benevolent economists with the then head of the Institute for Fiscal Studies, Andrew Dilnot, somewhere high up in Cabinet.
I pondered this while the IFS revealed perhaps the most important non-party document of the pre-election period. Its Green Budget, released today, is thicker than the actual budget document, and an invaluable guide through the maze of public finance posturing.
Author: |Posted: 7:27 pm on 28/01/10
Category: Faisal Islam on Economics
The leader of the opposition David Cameron told Channel 4 News today that the Conservatives would start cutting the deficit this year, even if Britain relapses into recession in this quarter. “We’re saying we must make a start in 2010,” he told me in Davos.
In one of his first interviews following this week’s poor economic numbers he did concede that a renewed economic contraction meant “the scale of what you might want to do needs to be worked out in conjunction with the Bank of England”. read more
Author: |Posted: 1:09 pm on 28/01/10
Category: Faisal Islam on Economics
In 1997 a triumphant Tony Blair and Gordon Brown made their debut on the world economic stage here at Davos.
I’ve just been in the congress centre when David Cameron and George Osborne swept in. I happened to be chatting with an Indian businessmen and old Etonian schoolfriend of Mr Cameron’s, who literally chased after him as the man of the moment.
It’s difficult to say whether he is the most anticipated Mr Cameron here in Davos, given this evening’s hot ticket is a screening of Avatar with its director James Cameron.
Nonetheless, Britain’s Mr Cameron knows that if he is elected in the coming months, his role in the world is substantially different to that of his predecessors. He appears to believe he will have a selling job to do as regards international confidence in the UK economy as a result of the public debt surge. That severely undermines Britain’s economic weight in the world.
The Conservative leader will actually be able to see it in the halls and the hotel lobbies of Davos. The excited, optimistic chats are being had between Indians and Brazilians or Russians and Chinese. “South-South” trade is the watchword. Western politicians and bankers seem to be arguing about the credit crunch fallout.
On the home front, I’m wondering if this week’s poor GDP figure has shaken any of his resolve to start cutting spending this year. On last night’s news one man claimed by Cameron and Osborne as their own adviser, former IMF chief economist Ken Rogoff, said that “It’s difficult to say exactly the timing but the stimulus needs to get withdrawn, at least slowly. I wouldn’t do it too fast, we just don’t know what it might do.”
And as the Tories try to outflank the government, at least rhetorically on bank reform, another Tory adviser Bob Diamond, said that the Obama plans backed by Cameron, “would have a very negative effect on jobs”.
So for Mr Cameron, Davos is a window on a different role for Britain in the world.
-Author: |Posted: 1:03 pm on 27/01/10
Category: Faisal Islam on Economics
So we now know that Lord Mandelson occasionally refers to himself in the third person, and that Ken Clarke would have been cutting spending last year, but that there’ll be “no starving policeman or nurses”.
Pardon my bias, but there was important light as well as heat from last night’s 20 minute Big Beast Battle even as I travel on the snowtrain to Davos.
Author: |Posted: 6:27 pm on 26/01/10
Category: Faisal Islam on Economics
I was with the Chancellor in the Treasury in October 2008 when the UK registered its first negative GDP figure for a decade and a half, signalling the start of the recession.
And I earlier I was interviewing the Chancellor at number 11 as the UK limps unconvincingly out of its Great Recession.
At the Treasury they are adamant that they have communicated a ‘cautious’ line pretty consistently. The flaccid 0.1 per cent figure was not a surprise they say, some had been privately expecting flat
growth.
When pushed on why on earth it is the UK that has the longest, deepest recession and the tamest post recession growth, the Chancellor blamed the size of the UK financial sector.
He did acknowledge the unflattering comparison with other economies: ‘It’s taken us longer to come out of recession’ he told me.
But he pointed to other measures of the economy: ‘unemployment is a lot less than America… there are grounds for being confident’.
Above all it seemed to reinforce the rhetoric and the arguments, that he has seemed to play down in recent weeks, in favour of a softly softly approach to the deficit.
‘I’ve always that we need to start to reduce by 2011 when recovery is established – today’s figures show the sheer folly of starting to cut away significant government support just at the time when growth has return albeit modestly – the Tory approach’.
Author: |Posted: 11:24 am on 26/01/10
Category: Faisal Islam on Economics
Again the economic experts are confounded by the sheer durability of Britain’s economic malaise.
By the narrowest possible margin* Britain has squeaked out of recession. It’s entirely possible we could actually still be in recession, once further revisions are made in the coming weeks.
Author: |Posted: 6:22 pm on 25/01/10
Category: Faisal Islam on Economics
Today is likely to be the last day before the recession is announced as officially over. read more
Author: |Posted: 4:52 pm on 23/01/10
Category: Faisal Islam on Economics
The Indian environment minister clearly wanted to make a point. After some fierce negotiating in Copenhagen, Jairam Ramesh, found himself on his first visit to the Sunderbans tiger reserve.
And he was clearly still contemplating those negotiations when he launched a verbal attack about the ‘constant preaching’ from Britain’s climate change minister Ed Miliband.
