Europe

Europe looms its head to threaten the coalition and the Tories

The Telegraph’s splash on Europe indicates that the issue, which proved so toxic to the last Conservative government, has risen again. Writing a stern op-ed for the paper, serial rebel and anti-Cameroon Mark Pritchard calls for a referendum. This will have irritated Downing Street no end, which is understood to have hoped that the whip-sanctioned Eurosceptic grouping that has formed around George Eustice might have contained the party’s factious elements. But some disgruntled MPs on the right privately say that last week’s well attended meeting of Eustice’s group turned into something of a disappointment. The insistence that an exit from the EU was off-limits for the moment was apparently met

Osborne’s £12bn question

The FT makes for grim reading this morning (£). The paper claims to have replicated the Office for Budget Responsibility’s methodology and it has found that the structural deficit is £12 billion larger than was thought. If this is true, and coalition ministers are scrambling to deny it, then George Osborne is unlikely to have virtually eliminated the structural deficit by the end of this parliament, his avowed aim. The strategic implications are clear: the 2015 election would become a much tougher prospect for the Conservatives, as Osborne might to struggle to present them as the party that delivered the economy from disaster. There have been clear indications that all

The Lib Dems celebrate their achievements

Sandals are being rattled in Birmingham this morning. The Liberal Democrat conference opens to a chorus celebrating the party’s achievements in government. Nick Clegg tells the Independent that “Liberal Democrat fingerprints” are all over flagship coalition policies on schools, welfare, pensions, banking reform and the NHS reforms. He says of the latter that the Liberal Democrats have tempered the Conservatives. Clegg will reiterate this point at a rally later this afternoon. Despite news that the Liberals seek an electoral accommodation with the Conservatives, senior party figures are at pains to accentuate their differences with the Tories. Danny Alexander informs the Financial Times that he views the new backbench Tory Eurosceptic

From the archives: The doomed euro

It was doomed from the start; that’s the prognosis of those who think that the single currency’s crisis is near terminal, such are its structural and political weaknesses. People warned that it could be thus when the Euro was first launched. Bruce Anderson was among them:  Had Mr Blair been braver, he could have been in on this week’s euro euphoria, Bruce Anderson, The Spectator, 9 January 1999 The combined political will of 11 nations – or at least of their political elites – assured an easy birth for the euro. But the euphoria should not deceive us. Most thoughtful politicians and commentators throughout Euroland will acknowledge that the present

James Forsyth

The deep Euro-crisis threatens political stability

It is hard to overstate how serious the crisis in the eurozone is or what it might do to the politics of Europe. The European project is putting in danger the very political stability in Europe that its supporters have always claimed to be its strategic and moral justification. I understand that American banks are now so nervous about the situation on the continent that they have effectively stopped new lending to European banks. The view in Westminster today is that the Greeks will avoid default for a little longer. But few can see them making it to Christmas. Indeed, the expectation seems to be a default sometime in October.

Osborne: I know what it’s like to be in business

George Osborne spoke to Telegraph’s Festival of Business this morning and he gave a speech that was dominated by the issue of growth, or rather its absence. He reiterated the tax cuts and entrepreneurial relief measures first unveiled in March’s Budget. Osborne didn’t limit himself to his list of accomplishments. It was an empathetic speech. He related his memories of the “ups and downs” of his father’s business, the drapers Osborne&Little. He acknowledged the pressures of running your own enterprise in conjunction with a busy family life; a constant struggle that is exacerbated during hard times. “I know the kinds of pressure you are under,” he said. Osborne is frequently

“It started in Germany…”

Bugger the Bundesbank — that seems to be ECB President Jean-Claude Trichet’s current raison d’être. The ECB, together with other global central banks, yesterday agreed to provide dollar funding to ease the mounting liquidity crisis in European banks, largely caused by American banks curtailing interbank lending in anticipation of another crisis. This unorthodox action runs contrary to the wishes of the German Bundesbank, adding to the pre-existing strain between the ECB and the German establishment over bond purchasing, tension that was epitomised by the resignation of Jurgen Stark last weekend. Obviously, central banks do not take this action every day and it is yet another indication that crisis is now impending.

The last of England

Martin Vander Weyer’s column in the latest issue of the magazine is essential reading. It features five current stories from the business world. The Vickers report, Martin says, will merely offer the same poor service for consumers at a greater cost. Martin also notes, as he did two weeks ago, that American banks are winding down their lending to European counterparts in anticipation of a crash, and adds that American politicians are keen to paint Europe as the bogeyman for their financial ills, conveniently ignoring the failure of Obama’s hugely expensive stimulus. Martin also touches on unemployment and the Eurozone crisis. His final vignette is a parable for our troubled

Britain sues the ECB

As the EU debt drama continues unspooling like a perversely watchable soap opera (the FT’s Neil Hume describes it as ‘eurozone crisis porn’), an intriguing sub-plot has emerged: Britain is suing the European Central Bank. The Treasury is unhappy with an ECB move to limit the kind of euro-denominated products that can pass through UK clearing houses, suspecting it’s a bid to shift financial activity from London to Paris/Berlin. So it’s taking legal action, the first of its kind by an EU member state. This is not the first UK-EU disagreement that has surfaced in recent months, underlining the tensions between Britain and the Continent as financial centres across Europe

Merkel & Sarkozy have only words

It was something of a mystery. Emergency conference calls about the future of the Eurozone were being made yesterday, but there was no news of those discussions. As it turned out, this was for the best of all possible reasons: there was no news to report. Angela Merkel and Nicolas Sarkozy announced no new measures to alleviate the sovereign debt crisis; rather, they merely declared “solidarity” with Greece and assured the markets that Greece would not be forced from the single currency. Their words seem to have assuaged the markets for the moment, but only the most brazen optimist would bet on the rally being long lived. Tests of confidence

Clegg sounds a dire warning on the economy

Nick Clegg gave a speech on the economy earlier this morning. As Tim Montgomerie notes, Clegg came close to admitting that the economy is nearing crisis. He said, “The economic context is much worse than before. Yes, facts have changed” and added that the “government is not blind to deterioration in economic environment”. These warnings tighten a knot in already sick stomachs; but, with the Eurozone mired in a crisis that is fast becoming existential, banks under mounting strain, rising unemployment, widespread talk of further Quantitative Easing and the very public internal debate in the coalition about the need for tax cuts, Clegg’s comments don’t come as a great surprise.  He also introduced

The Euro-crisis heats up

Angela Merkel, Nicolas Sarkozy and George Papandreou are in crisis talks about Greek debt. There are rumours that they are preparing an “orderly default” for Greece. But, officially, Merkel is still pressing ahead with implementing the existing Greek debt deals. This meeting also has a domestic context for Merkel. According to the FT, she is determined to stamp on the growing disquiet within her governing coalition over the Eurozone crisis and is pleading for calm resolve. It remains to be seen if she succeeds.  The danger of contagion within the Eurozone remains and concerns about the exposure of French banks persist, which is doubly worrying for Nicolas Sarkozy given the proximity

Hague says he’s been held back on Europe by the Lib Dems

William Hague’s comments in an interview with The Times that the Liberal Democrats are restraining the Tories on Europe will increase the grumbling among Tory backbenchers about the power of the junior coalition partner. Hague tells the paper that ‘A point of difference in our manifesto was the aim to repatriate some powers. Clearly that’s something I’m in favour of, but that’s the area we had to compromise on in return for other compromises.’ (In many ways this is a statement of the obvious. But in the current uncertain European environment, his remarks are news). In an attempt to reassure euro-sceptics, Foreign Secretary stresses that the Conservative party ‘would like

Newsflash: Americans and Europeans like each other

A decade has passed since the attacks of 9/11 and so much water has flown under the proverbial bridge. Today, ordinary Americans don’t want to have a leadership role in the world, and Europeans aren’t too keen on it either. And having dithered over what to do about Guantanamo Bay, most people in the US and Europe don’t trust President Obama’s counter-terrorist policies. Right? No, actually wrong. According to the tenth-annual public opinion survey of the general public in the United States, Turkey, and 12 European Union member states – the Transatlantic Trends – 54 per cent of respondents from European countries surveyed want the United States to show strong leadership in world

Cameron faces the eurosceptics

If Tony Blair thought that a meeting with Gordon Brown was like dental surgery without anaesthetic, one wonders how David Cameron would describe being questioned on Europe by Bill Cash and Bernard Jenkin. At the liaison committee, the two veteran eurosceptics pushed Cameron on why he was supporting far greater fiscal integration in the Eurozone. Cameron’s answer was, basically, that this was the only way the Eurozone could be made to work. But one can’t help but feel that greater fiscal integration is simply storing up problems for the medium term given that it will do nothing about the divergence in competitiveness between Eurozone members. The rest of the session

EU bans Syrian oil imports

The EU has banned imports of crude oil from Syria. This is being touted as a major success for the EU, displaying the ability of governments to act collectively. Oil sanctions on Syria should, theoretically, impede President Assad: 95 per cent of Syria’s oil is exported to Europe, worth roughly £3bn a year. Germany and Italy are the premier destinations. This is a welcome move against a brutal tyranny, but the embargo is not the total success that it might have been. Italy was stalling earlier in the week, trying to defer the deal’s implementation until 30th November 2011, when existing contracts expired. Other European countries were pushing for a more

James Forsyth

Lagarde sets about the Eurozone

When Christine Lagarde took over the IMF top job, it was widely assumed that she would simply continue her predecessor’s policy of almost unconditional support for Eurozone bailouts. But Ken Rogoff, the IMF’s former chief economist, has detected a hardening in the IMF’s approach. He thinks that Lagarde’s call for, as he puts it, “forced recapitalization of Europe’s bankrupt banking system” signals a new, tougher approach towards the euro-zone. As Rogoff says, the IMF’s previous approach to the euro-zone simply wasn’t credible. The idea that Spain was really at no more risk of a default than Germany was risible. But, as Rogoff argues, there won’t be a full restoration of

Eurosis

Most of Europe takes all of August off for summer. Paris is empty, Brussels eerie and nobody works in Madrid. But as politicians and officials come back from their holidays, they are finding that the problems of the euro have not gone away. Quite the contrary. No less a supporter than former EU Commission president Jacques Delors believes that the European currency is still “on the edge of the precipice”. It is easy to see why the European grandee feels as he does. The euro eased against the dollar today, taking a cue from lower stocks; the euro was down 0.6 per cent. The losses came on top of data

Merkel’s hard game

As James noted earlier, Angela Merkel’s response to the Eurozone crisis is hampered by the awkward arithmetic in the Bundestag. Merkel has been faced with these difficulties throughout the crisis. Her answer has been to oppose initial proposals to solve the Eurozone crisis, only to relent later in the day. This has been the pattern from the first Greek bailout to the expansion of the EFSF, which is currently before the Bundestag. Might her apparently determined opposition to Eurobonds (which, of course, would require a huge transfer of power and cash from Berlin to the Med and Brussels) go the same way? Wolfgang Münchau has a comprehensive piece on the

Osborne’s crusade

‘Tax evasion is morally repugnant. It’s stealing from law-abiding people who face higher taxes to make good the lost revenue. Those who evade taxes, like benefit cheats, are leeches on society. And my message to those who try to hide their incomes from the Revenue in offshore bank accounts and false declarations is simple: we will find you and your money.’ That was written by George Osborne in today’s Observer. He promises that the deal with Switzerland is “just the start” of his campaign to close tax havens. The rest of the article then relates the coalition’s achievements at reducing tax avoidance by increasing charges on capital gains and non-domiciled