There’s an interesting piece in The Telegraph this morning, in which Chancellor George Osborne complains that Britain is bust and cannot afford either tax cuts or subsidies to boost growth. Is he right? It seems strange that Mr. Osborne would make such a statement, given the negative impact it’s likely to have on the markets after all. I imagine then his statement is intended for some alternate purpose, perhaps to encourage a weaker pound. (We are supposedly in the midst of a global currency war, in which global powers engage in a battle to weaken their currencies and so boost exports.) If this is Mr. Osborne’s aim then he has failed, because the pound has gained against a basket of currencies over the weekend. What do you think? Is the UK still in poor shape?
Elsewhere in the UK, it’s also interesting to read that LLoyds TSB and Royal Bank of Scotland are set to take advantage of the second European Central Bank loan scheme (LTRO) later this month. The LTRO enables European banks to receive unlimited 36-month loans at just 1.0%, and has been widely credited as preventing a second credit crunch in Europe. On the other hand, it is also acknowledged that banks that engage in the scheme do so because they have nowhere else to go. I would not take this as a sign that Lloyds and RBS are in robust health then.
Europe To Pump Up Its Firewall?
Turning to Europe, the G20 met in Mexico City over the weekend, specifically to discuss the possibility of increasing global aid to prevent a Eurozone crisis. Perhaps not too surprisingly, given that leading Eurozone powers including Germany have expressed reluctance at contributing to the rescue fund to date, global powers including the US and UK told Europe to take a walk. And why not? Though it’s doubtless true that the Eurozone crisis threatens the globe, it is not incumbent on global powers to save Europe when Europe itself has not shown full commitment to preventing a crisis. For me at least, Germany in particular must overcome its antipathy to aiding southern European countries such as Spain, and accept a full transfer union (equivalent to a federalised Europe.) What do you think?
Last but not least, I’m disappointed to learn that Julia Gillard has beat former foreign minister Kevin Rudd to remain Prime Minister of Australia this morning. Disappointed because Gillard seems a typical politician, practiced in the art of making double-speak statements that don’t mean anything at all. Rudd on the other hand seems erudite and likeable. But I doubt this is the last we’ve seen of him, given his widespread popularity among the Australian population!