Christian Schulz of Berenberg Bank has calculated that total exposure of the rest of the world is just over €424bn. To put this in context when Lehman Brothers went belly up in September 2008, giving the global economy a heart attack, the US investment bank had liabilities of $613bn, which works out, at present exchange rates, at €476bn.
If the Chancellor had cut less on infrastructure and housing, other things being equal, construction would not have fallen by the same degree, GDP growth in the first quarter would have been flat, and Britain would not now be in a double dip recession.
It’s going to be interesting to see how the Bank of England’s Monetary Policy Committee explains why it didn’t act this month on the very figures that it saw as extremely important four weeks ago.
Two years ago, the coalition set out its programme for government. Today, the Prime Minister and Deputy Prime Minister reaffirm their commitment to the central element of that programme – cutting the deficit quickly. This is despite the dismal results this strategy has delivered, despite the fact that even the IMF is arguing that there are more sensible alternatives, and despite the growing realisation in the eurozone that austerity is a dead end.
Be wary of those who confidently assert that our present economic malaise is a consequence of high household debt levels. And certainly don’t accept for a moment the argument that British banks fell over because they lent too much to us.
The UK has now plunged into a double dip recession, according to figures released Wednesday. But in Germany the economic prognosis could not be more different. Why is the German economy showing such stomach for the fight against the global downturn, while Britain staggers from its toxins?
Wednesday’s growth figures were as bad as anyone could have anticipated. And while there’s a good chance that they’ll change – the recession could yet be revised away – none of this alters the fact that the UK economy is in the doldrums. Being economically becalmed is bad enough, but we’re even slipping into a recession without a meltdown in the Eurozone.
So allow me to explain my vote for no change to policy at the April Monetary Policy Committee meeting. This seems to have surprised people, but it really should not have. I have been saying publicly since the February meeting that there is very little distance between the Committee’s modal forecast and my own forecast – in contrast to last summer before we undertook additional asset purchases.
Since Christine Lagarde took over the IMF at the turn of the year, they’ve made it more and more obvious that they thought a number of countries including the US, Germany and (by implication) the UK, were tightening fiscal policy too fast.
What stunning self-righteousness. And what hypocrisy too. Where is the punishment for the creditors of those Irish banks – many of them German financial institutions? If Joerg Asmussen is so keen that sinners pay for their mistakes, why is he apparently content for those profligate lenders to get off free of charge?
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