In today’s Observer, Andrew Rawnsley offers Gordon Brown these words of advice: “It would be an added bonus if he and his ministers could articulate a sense of purpose and an air of dynamism.” Spot on, as far as I’m concerned. Problem is that Rawnsley’s lines were printed on the same day as Gordon Brown released his New Year message – a rather dour and sinister list of all the challenges that Britain needs to overcome in 2008.
The message contains all the usual stuff about terrorism and security (groan), unity of Britain (“Our priority at all times, our guiding purpose: One Britain of security and opportunity for all the British people” – groan), but some more interesting lines about the state of the global economy. This line was of particular interest:
The global credit problem that started in America is now the most immediate challenge for every economy and addressing it the most immediate priority.
What planet is Gordon Brown living on? It’s most defintely not the same one as the leaders of most European countries. For Romano Prodi and Nicolas Sarkozy spending power is the issue of major importance in the economy – a lot of Europeans are increasingly worried by inflation. Equally I have not read about any fears that a crisis similar to Northern Rock is going to happen in any other European country. Maybe Brown might find out in January – according to IHT, he’s invited Angela Merkel and Nicolas Sarkozy to London for a meeting on financial market stability. Fair enough, but shouldn’t there be a discussion of these issues at EU level?
“I have not read about any fears that a crisis similar to Northern Rock is going to happen in any other European country”
It’s happened – the ECB has dumped vast, unimaginable, Northern-Rock-loan-dwarfing amounts of cash both into the credit markets and directly in discount loans to lending banks.
They are a more secretive institition so have been able to keep the identities of the borrowers (we know IKB Deutsche Industriebank is one) under wraps so there wasn’t a run on retail deposits. Whether you think that is a good or a bad thing is a matter of opinion.
But yes, inflation is frankly the bigger problem, the credit bubble will eventually unwind whatever the Central Banks do – the only way to stop busts is to stop booms, and nobody was interested in doing that in time.
Trouble is that inflation is high and rising in certain Eurozone countries and not others, which are suffering more from the downturn. I’m going out on a limb here, but it’s almost as if different countries need different economic policies.
Happy New Year.
Dour or hopeful, but was it a message from the Prime Minister of an EU member state?