The G20 summit failed to allay fears of world recession, breaking up tonight in ‘disarray’ having failed to agree a deal for the IMF, reports Shamik Das.
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• The G20 summit failed to allay fears of world recession, breaking up tonight in ‘disarray’ having failed to agree a deal for the IMF.
There is growing worry tonight that Italy will follow Greece towards the abyss, with Italian borrowing costs marching towards the “point of no return”. Italy’s austerity programme will now be monitored by the IMF.
In Athens, meanwhile, the Greek government once again stands on the precipice, prime minister George Papandreou, whose botched referendum announcement accelerated the latest crisis, facing a vote of confidence tonight.
David Cameron tonight said there urgently needed a solution, that “the world can’t wait”:
“Every day that the eurozone crisis continues and every day it is not resolved is a day that it has a chilling effect on the rest of the world economy, including the British economy. I am not going to pretend all the problems in the eurozone have been fixed.
“They have not. The task for the eurozone is the same as going into this summit. The world can’t wait for the eurozone to through endless questions and changes about this. We like the rest of the world need the eurozone to sort out its problems. We need more to happen in terms of detail on the European firewall.”
“The very worst thing would have been to try and cook up a number without being very specific about who is contributing what. If you cannot do that, it is better to say the world stands ready to increase resources to the IMF as necessary.”
The latest bailout deal, agreed earlier in the week, had managed to restore some market confidence in the struggling eurozone, but Papandreou’s shock referendum announcement on the terms of the bailout sent stock markets spiralling and left Europe in the grip of an even deeper political and economic crisis.
The stakes could not be higher.
As we reported yesterday:
“The European Commission has announced there is no way for Greece to leave the euro without also leaving the EU. Since the latter is far less preferable to Greece than the former, this ties the country’s hands still further.
“Their choices are now limited, essentially, to two: take the bailout, and the harshest austerity package ever inflicted on a nation; or default, leave the euro, and leave the EU. The political class are relatively united in the belief the former is preferable, but the public are not as supportive. This was the spark for Papandreou’s attempt to put the measures to a referendum; he feared the unpopularity of such measures without popular consent would cause even more unrest.
“It now looks likely Greece will take the bullet for the eurozone’s stability; whether this is a long term solution remains to be seen.”
• So where exactly does it all leave us?
For the latest on where we’re at, who better to brief us than Newsnight’s Paul Mason, who, fresh from his “smackdown” by Sarkozy, blogged tonight:
– The deal agreed in Brussels is back on track, in the sense that it remains as fuzzy, unfunded and incoherent as it was on 28 October, but has not been formally nixed by Greece.
It apparently took the combined might of Barack Obama and Hu Jin-tao pressuring Europe to get this done, and the combined might of Sarkozy and Merkel on Greek PM George Papandreou, finished off by the combined might of every internationally clued-in MP in Pasok.
– But the EFSF remains at the design stage – Merkel’s storm-out came after she had briefed journalists that no G20 outside Europe would commit to lending to the EFSF.
This is a dig at China, and China is not buying because it realises that through the EFSF it could lose its money – whereas through the IMF it cannot.
– So the IMF is under pressure to be part of the euro solution – I understand from the Brits this will be formally acknowledged in the communiqué. But even here, you run into democratic accountability.
The US has not even got Congressional approval for the last tranche of IMF money it committed to – and David Cameron is pretty clear he cannot win another vote to expand Britain’s IMF commitment(about £30bn currently of which £5bn drawn down).
– So it’s all down to the ECB.
The Germans – indeed northern Europe – have created a trap for themselves in which it is either fiscal union or a rough-hewn fiscal union in which the ECB does the heavy lifting, in defiance of its mandate and culture, and the instincts of the national central banks.
• Domestically, on the UK economy there was, on the face of it, good news on growth – but nowhere near good enough, the long term trend still dispiriting.
As we reported on Left Foot Forward, the government’s fast spending cuts have pushed the economy from the fastest quarterly growth for a decade towards zero; more from Cormac Hollingsworth:
“A year ago, the fastest growth since 1999 cut the deficit by £10.8 billion, that’s on top of the £2bn of the VAT rise. It is possible that St Paul’s clearing out the tents is not some craven capitulation but an expectation that certain other political constituencies will start praying very hard for a Labour-like growth miracle.
“After all, in Q2 and Q3 2010 the UK economy fourth quarter growth exceeded the 2.1% average since 1998. Since then the economy has been on a downward track to today’s value that over the past four quarters from Q3 2010 – Q3 2011, the economy has growth by only 0.5%.
“The slow growth of the current year according to the city forecasts is expected to increase the deficit £13bn. (calculated from the current Treasury consensus forecast for public borrowing of £129.8bn). The problem for the coalition is that low growth increases borrowing over the life of the parliament.
“So while the OBR forecast in June 2010 that borrowing would be £89 billion in 2012-13, the consensus forecast is for that to be £113.6bn. The outlook is bleak; expect lots of Tories at prayer in St Paul’s very, very soon.”
While on the impact on jobs, Tony Dolphin wrote:
“The slowdown in the UK is the result of a mix of domestic factors, particularly the chancellor’s tough fiscal stance (which has knocked confidence in the private sector about future levels of demand), and global factors such as higher oil and food prices.
”In terms of employment, a recession now looks inevitable. The International Labour Organization warned yesterday the world economy was on the verge of a new and deeper jobs recession. In the latest three months (to August), employment in the UK was 178,000 lower than in the previous three months.
“With the outlook for output growth deteriorating, it is hard to see how the UK can avoid falls in employment in the third and fourth quarters of this year – a jobs recession.”
For the rest of the reaction to the 0.5 per cent GDP rise, including shadow chancellor Ed Balls describing the economy as “bumping along the bottom”; market analyst James Knightley saying “the underlying picture remains weak”; and Unite general secretary Len McCluskey calling the figures “paltry” see our round-up here.
Progressive of the week:
Billionaire philanthropist and Microsoft chairman Bill Gates, who told the G20 last night that innovation, alongside continues investment in international aid, was key to solving the world’s problems, saving lives greater prosperity for all.
Gates presented his “Innovation with Impact: Financing 21st Century Development” report (pdf) to world leaders in Cannes this afternoon, outlining the steps that should be taken to bring about a fairer, more equal planet.
On international aid specifically, constantly under threat from the selfish, uncaring right – and to his great credit, constantly being defended by David Cameron – he stressed:
“Times, some people will say rich countries should cut their ODA. They should not. Not only because they have made promises, but also because important pieces of the development agenda won’t be addressed without assistance. ODA spurs innovation by funding pilot projects that poor countries would not undertake themselves…
“One stark way of looking at it is to consider the death toll from AIDS. It costs approximately $450 per year to treat a person for AIDS. A donation of $450 to the Global Fund to Fight AIDS, Tuberculosis, and Malaria, for example, keeps somebody alive for a year and helps prevent the disease from spreading.
“Conversely, every $450 that isn’t forthcoming represents a person the world is willing to let die from a treatable disease. Sometimes, it’s a simple question of money…”
For more see our article here.
Regressive of the week:
The coalition’s pensions tsar Lord Hutton, who this morning jumped back on the anti-union, anti-public sector workers bandwagon, and repeated his lie, his big fat lie, on the sustainability of public sector pensions, a point on which we’ve corrected him on Left Foot Forward in the past, here and here.
For our latest rebuttal, complete with graphs (from the Hutton pensions report no less) showing how wrong Hutton is, see here.
Evidence of the week:
The Committee on Climate Change Review of UK Shipping Emissions (pdf), which yesterday warned the UK’s share of international shipping could account for up to 11 per cent of British emissions by 2050 – and called for shipping emissions to be included in the government’s climate targets.
Under the Climate Change Act the UK has to cut its emissions by 80% (of 1990 levels) by 2050 – yet this target doesn’t include the UK’s share of emissions from international shipping or aviation, to the incandescence of Friends of the Earth, whose transport campaigner Richard Dyer said:
“Leaving out the UK’s share of international shipping from our climate targets would be like an alcoholic giving up all booze except whisky. Ignoring the growing climate impact of shipping would be a titanic mistake which could sink our ability to develop a safe and prosperous future.
“The international community must also take urgent action to ensure the shipping industry plays its part in a low-carbon transport system.”
As we reported yesterday, in 2007, the International Maritime Organization (IMO) estimated carbon dioxide emissions from shipping – then estimated at at 4-5% of the global total – could rise by up to 72% by 2020 if no action gets taken, while in 2009, a study found one giant container ship could emit “the same amount of cancer and asthma-causing chemicals as 50m cars”, concluding the health risks of shipping pollution had been “underestimated”.
It seems ludicrous international shipping (and aviation) emissions are not included in the UK’s climate targets; time for the ‘greenest government ever’ to live up to its name.
The World Outside Westminster by The Grapevine’s Tom Rouse:
Herman Cain’s campaign has been rocked this week after former employees lined up to accuse the pizza magnate of sexual harassment. These claims have been given further weight by Chris Wilson, a veteran republican pollster who alleged that he witnessed Cain harassing a woman and that Cain was asked to stop by others at the same table.
The Cain campaign has gone on the defensive, forcefully denying the allegations and accusing Rick Perry’s campaign of orchestrating the attacks. Perry is still struggling to pick up momentum, having slipped to 6th in Gallup’s most recent assessment of the contenders’ favourability ratings.
Attack ads are becoming more prominent in the GOP nomination race, with the latest effort, an attack on Mitt Romney being released by Priorities USA Action, a PAC committee committed to the re-election of President Obama.
Barack Obama’s poll ratings are slowly but surely increasing, with his disapproval down to just five points. The last week has seen him go on the offensive once again over Congress’s failure to pass his jobs bill, attacking Republicans for spending more time reaffirming the nation’s motto than on efforts to stimulate the economy.
As you’ll have seen above, Greece once again dominates the European headlines, with the eurozone lurching from crisis to crisis.
In echoes of the controversy over the Danish cartoons in 2005, a satirical French magazine’s office was burnt down after it published a caricature of the Prophet Mohammed. Charlie Hedbo put the image of the prophet on the front page and named him as guest editor. The magazine’s website was also hacked and the attack has been condemned across France as an unacceptable attack on the right to free speech.
Ed Jacobs’s Week Outside Westminster:
Speaking to a special conference of the party north of the border, Labour’s outgoing leader in the Scottish Parliament, Iain Gray, had a stark message for those vying to succeed him.
Addressing delegates he warned:
“You will be attacked. You will be smeared. You will be lied about. You will be threatened. The cybernats and the bedsit bloggers will call you traitor, quisling, lapdog and worse. They will question your appearance, your integrity and your sexuality.
“They will drag your family and your faith into the lies and the vitriol. If you are a woman it will be worse. It is no consolation to know that any journalist or commentator who gives you a fair hearing will suffer the same.
“This is the poison some have brought into our politics and it is vile.”
The SNP’s pledge, meanwhile, that Scotland could leave the United Kingdom whilst simultaneously keeping sterling in favour of the euro came under fire from a member of Alex Salmond’s own Council of Economic Advisers.
In a new book, Professor Andrew Hughes Hallet of St Andrews University wrote:
“First, all new members of the EU are required to join the euro eventually and it is not clear there are grounds to argue that Scotland has the right to inherit the UK’s current euro opt out.”
Having come third in the race for the Irish presidency, Sinn Fein’s Martin McGuinness returned to Belfast to resume his duties as deputy first minister with the Belfast Telegraph concluding the campaign was a “hard lesson” for Sinn Fein.
In an editorial, Ed Curran argued:
“Martin McGuinness should return to Northern Ireland politics this week a somewhat chastened figure. His adventure into the Irish presidential election failed to rid him and Sinn Fein of the ghosts of the past.
“On the contrary, it merely reminded us that there are too many questions unanswered and many issues unsettled despite the peace process. Mr McGuinness may blame the Dublin media and establishment for treating him with unfair disrespect given his power-sharing role at Stormont. Certainly he was subjected to a degree of intense scrutiny which is rarely applied in Northern Ireland.
“However, Mr McGuinness asked for it from the moment he said that his campaign for the presidency had the support of victims of IRA violence. He played the peace card but it was trumped. Victims in the south came out to oppose his candidacy rather than support him.”
Meanwhile, as events in Greece dominated the G20, Northern Ireland’s first minister, Peter Robinson had a message of praise for Ireland, another recipient of bailout money.
In a speech in Dublin, Robinson said:
“An economy which was known as the Celtic Tiger for many years has not lost the fundamentals upon which it was based. It’s not my place to advise you or your government on how to deal with the economic problems faced here, but I am sure that your government is right in avoiding short term simplistic solutions. They are no substitute for the difficult, long term measures that are being taken.
“While our public spending in Northern Ireland is constrained in the next few years, we have been somewhat insulated by being part of the United Kingdom Public Expenditure system. Our job in the executive is to take the decisions which will build our economy in the longer term. The world economy is currently in a state of volatility and uncertainty, due to multiple economic shocks. The UK economy has weak economic growth and rising unemployment, requiring a further round of quantitative easing.
“The Republic is one of our key markets for exports and tourism, and it is in our interests, as neighbours and trading partners, to strengthen those economies, recognising what works and taking a pragmatic approach to guide us through these difficult economic times.”
Outlining the central message, health minister Lesley Griffiths explained:
“Sustainability lies at the heart of the Welsh government’s agenda, and there is an increasing consensus among clinicians that unless we take action now to address the challenges facing the NHS, that safe, sustainable, high quality services, delivering the best outcomes for patients, will not be achievable.
“There is, therefore, a compelling need for change with a rebalancing of how many services are delivered. However, service change is just one aspect of this vision. The bigger picture is the change in thinking and behaviour, with a focus on positive health and improving the quality of care and services based around people, not buildings.”
As MPs, meanwhile, got the chance to debate the Silk Commission into the future of Welsh devolution, shadow Welsh secretary Peter Hain was clear in his opposition to the Assembly gaining full financial freedoms, concluding:
“Under devo-max, as we understand it from the Scottish model, Wales would be responsible for raising all of its own revenue. The truth is: we simply couldn’t do it. It would be impossible suddenly to halve public spending in Wales.
“So with devo-max, income tax and other taxes would have to literally double overnight just to maintain current spending levels – clearly a preposterous scenario which, if ever implemented, would have a devastating impact upon the Welsh economy and people’s way of life.”
This week’s most read:
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1. So is Britain really “full up”? – Matt Cavanagh, IPPR
4. Fast spending cuts push economy from fastest quarterly growth for a decade towards zero – Cormac Hollingsworth
5. Migrationwatch’s 70 million cap proposal is dangerous and unfeasible – Ruth Grove-White, Migrants’ Rights Network