Murky times ahead for Britain and Europe

The mood has changed. The skittish scramble to interpret polls, worms, runes, and tarot cards has begun to taper off. A Tory Government is built into most expectations. Being British we’ve transferred our anxieties somewhere else. What happens next is the new topic of conversation and commentary.

Leading the way, the Telegraph’s Simon Heffer urges David Cameron to go immediately to the IMF seeking a resolution of our problems. It has to be asked, though, what can they do that we can’t do ourselves?

The IMF usually arrives on the doorstep when a nation is refused entry to the debt markets at affordable rates of interest. That happens when the rating agencies, Standard & Poor’s, Fitch and Moody’s, drop the country’s sovereign credit rating to junk status. That has happened to Greece which must refinance some €20 billion of sovereign debt in May, with plenty more in the pipeline.

The spectre of Greece is a potent one for us in Britain. It typifies the horrors we could face if the agencies turn on the UK — we have a similar deficit-to-GDP ratio as Greece has, but ours is much larger, £163 billion last year and probably more this. If we lose entry to the private debt markets, the Government would be unable to sell its bonds (gilts) and therefore not be able to finance its borrowing. Public sector pay would soon cease and all manner of services grind to a grisly halt.

For the IMF to cover our Government’s borrowing for two years, it would have to stump up something like £350 billion. Given the state of the world’s economies and the bailouts already undertaken, I doubt the IMF would have the funds to take on Britain’s gargantuan budget overspend. Moreover, if it did, it would demand draconian measures from the new Government to force the country back on track.

Also likely, IMF chief Dominique Strauss-Khan and his team of accountants would suggest greater depreciation of the pound to boost exports. For us that would be like shifting our goods from Harrods and John Lewis and flogging them off cheap on market stalls. We would feel noticeably poorer. As imports and fuel costs rose to levels unaffordable by many, the strain on the public finances would be intense.

The country clearly would be impoverished, only finding equilibrium at sharply reduced living standards. That is the price of 13 years of Gordon Brown.

The alternative is to slash government spending immediately, releasing more cash for the private sector to grow the economy out of trouble. It would also over time cut the nation’s interest payments on its debt.

Either way, there will be considerable pain for years. Better then to confront it head on, as the Irish have done, and at least have the benefit of virtue.

Politically, a quick application to the IMF might make sense. Gordon Brown and Labour would be saddled with its own mess. However, the damage to Britain’s reputation as a serious power would be incalculable.

The Irish handled the same problem a year ago and began the trojan task of sorting it out. They have to bear the added burden of membership of the eurozone with its one-size-fits-all currency.

Unable to devalue internationally, they have had to do it internally, effectively creating deflation through wage cuts and other measures. It is reckoned that Ireland has lost around 20% of its economy, and one-fifth of its housing is unoccupied. The good times vanished overnight.

But at least they have tackled the problem themselves, and it’s beginning to bear fruit. I don’t recall much rioting on the streets, or Greek-style student protests. Ireland is a Northern European country and has taken its medicine stoically. It helps that Brian Lenihan, the finance minister, has levelled with the population and treated them as adults.

Contrast that with the UK. Not a single party leader has defined the scale of our national debt, which will hit 100% of GDP within the next Parliament. That’s when events take on a life of their own and run away with you.

Gordon Brown tries to deceive us by claiming he will halve the deficit in four years. He hopes you’ll mistake the deficit (£163bn) for the debt (£800bn and rising fast). The deficit is the annual addition to the debt. Go figure.

Astonishingly, Nick Clegg and the LibDems want us still to join the euro. A Liberal government would have propelled us in at the start, 11 years ago. They are finessing that message now, but “sometime in the future” it remains an aspiration.

Do they honestly think the eurozone will still exist in its present form? The minimum price for continuation of the common currency will be the loss of some southern states and a political union with a single treasury. Germany will resist that to the end.

Only the Conservatives have used honest language in this election campaign: “A new age of austerity”. But look how quickly they modified it when their 10-point poll lead melted away.

The truth is, Labour has infantilized whole swathes of the British population to which even the mild word “cuts” is now anathema. As in the 1970s under Labour, the trades unions are rediscovering their savagery and revolutionary fervour. Welcome to the past.

A major problem for the Tories is that neither David Cameron nor George Osborne are in a comfortable position to announce major cuts in living standards. Both are well enough off to avoid any significant austerities in their own lives. The public will know that and resent it. What remains of Labour and the unions will have a field day. You’ll never hear the end of, “Unemployment is a price worth paying.”

The solution is to bring back the “regular guy” Ken Clarke as Chancellor — another suggestion by the Heff, but a good one this time. The public will be more likely to take the harsh medicine from him than any other. If Britain is the nation it used to be, we’ll take it on the chin and cheerfully get on with making the most of it.

Gordon Brown’s refrain in his last conference speech was “We have changed Britain forever!” Let us hope he is mistaken.

It is improvement the country needs, not “change” per se, and Brown is incapable of generating that.

John Evans

Recent Related Commentary
Saturday Ramble: What if I were Nick Clegg?
Saturday Ramble: The Church and a State of Grace
Saturday Ramble: Big Bangs are not what they used to be
Saturday Ramble: What if Labour were to win?
Saturday Ramble: Is David Cameron making the most of his abilities?
Saturday Ramble: Politics and the land of Cockaigne
Saturday Ramble: Bubbles — how they destroy us and how we can fight back
Saturday Ramble: Gordon Brown’s Invictus rictus

Search9Media is an entirely Irish blog network that has just opened up in Dublin. #

From the list of sites already up it’s clearly dedicated to Irish and local concerns. For example, Irish Jobs, Football, Shoes, DVDs, Bags, Bridal, Gadgets, Mobile etcetera. It’s just the kind of product based network that does really well on advertising, and being local will give it an instant leg-up with Irish internet users.

They are looking for bloggers right now — presumably with a touch of the blarney about their blogging. Here’s what they say about themselves :

I’m very happy to say that Search9Media is open for business! For the past few weeks we have been busy getting our network of websites up and running.

Search9Media is a Dublin based Blog Network (we think the first to launch in Ireland). We’ll be producing quality based content on a number of subjects by extremely talented writers.

We’ll be looking for bloggers in the next few days so make sure you check back if you are interested in writing for Search9Media.

Syntagma wishes Colm and the team great success with Search9Media : #