On the IFS thing

So, disorderly Brexit would push public debt up to 90% of GDP. This would be a bad thing therefore we must not have disorderly Brexit.

This will become a standard now, will it? John McDonnell becoming Chancellor will push up debt levels over 90% – yes, it will, he’s going to nationalise using debt – and this would be a bad thing therefore no making JD Chancellor then?

41 thoughts on “On the IFS thing”

  1. Guido and Sky News are saying that Rosa Klebb has killed off a deal:

    Merkel said that if Germany wanted to leave the EU they could do it no problem but the UK cannot leave without leaving Northern Ireland behind in a customs union and in full alignment forever. She said that Ireland is the government’s special problem and Ireland must at least have a veto on NI leaving. Merkel said that the PM should tell Northern Ireland that it must stay in full alignment forever, but that even this would not eliminate customs issues.

    ‘It was a very useful clarifying moment in all sorts of ways. If this represents a new established position, then it means a deal is essentially impossible not just now but ever. It also made clear that they are willing to torpedo the Good Friday Agreement’

    23 days, chaps. It’s coming home.

  2. Bloke in North Dorset

    If we have to borrow to get out of the EU then now’s the time. We’ve been told for years that with interest rates so low we should be borrowing to spend on useful projects.

    Our grandchildren will thank us in the future when they realise how much we’ve saved them.

  3. I have already dealt with this .The interesting coincidence is that the last time we hit this awful position was the mid 60s which is also about the time France and Germany flew past us leaving us the sick man of Europe and the international joke we are again .
    I have seen for ages that the Brexit charlatans planned to spend our children`s money covering up their lies and if we top out at 90 % be relived

    you may feel that the fact that a bunch of sixth form Communists are just as dangerous makes it ok but it does very little for me .

  4. 23 days, chaps. It’s coming home.

    No need to wait the 23 days if a deal is not possible, might as well do it today.

    We’d save £1.15 billion too (3 weeks, 2 days x £350m/week)

  5. You haven’t “dealt with” shit Facepainter. Tho’ maybe Granny Mercow should have consulted you –you puffed-up self important brainless, treasonous cunt–before her actions.

  6. Steve,

    Have I read that correctly, from the Reich Fuhrer?

    “If you want any kind of future trade deal with our cosy protection racket, ever, you must first surrender Northern Ireland to us”.

    Is that the gist of it?

    Because I can’t believe a majority of people in this country are such worthless nonces that they would capitulate to such a threat? And in which case, whatever the increasingly frantic squeals of Newms and all the multitudes of his fellow EU troughers, WTO it surely is?

  7. Itys on Guido directly quoted from No 10. What a nice Mercow to fucked the remainiacs for us and show that a Deal isn’t and never was possible.

    The remain gang can now advocate only total surrender. The Surrender Act is fucked and most people–in the face of EU arrogance–would be on my side with emergency powers use if needed to break the House of Traitors.

  8. I have already dealt with this

    Problem solved then! Let’s move on.

    I remember the days when the Krauts were honest and at least invaded you to annexe territory. Now they are so arrogant they just demand it.

  9. PF – Via a Number 10 source as Ecksy says.

    The DUP are being rather magnificent:

    “The EU is not interested in a negotiated outcome at this time. Their position is the UK can only leave with a deal if it agrees a binding piece of international law permanently tying either the whole country or a part of it to the EU’s legal order over which it has no control.

    “The true purpose of the ‘backstop’ is now in the open for all to see. Those who eagerly supported the backstop as the best of both worlds can now see the error of that assessment. It was neither temporary nor an insurance policy,” she said.

  10. This puts the Surrender Act gang up shit creek. An extension for what? So they can negotiate a brazen surrender?

    As I said I think LOTS of folk would support using emergency powers to ensure that any HoTraitors MP gang can’t sell us –and NI- out. And any attack on the UK’s sovereignty–albeit a verbal one (even Hitler started with the verbals)– might even by grounds for war powers.

    Plus–the traitors can’t decide already who they want for CareGiver Cunt. Which one of them wants to step up to organise a UK sellout surrender. The statement that Treason May’s WA shite was something “only a nation defeated in war would sign” has now been boosted100 fold.

    Who wants that on their CV?

    If Jizz was smart–which he fucking isn’t–he should announce that in view of Mercow’s statement the Labour Party will be supporting a No Deal Brexit on 31/10/19.

  11. Labour, Lib Dems, they’d give up Northern Ireland just to have a nice word said about them at a dinner party. It’s pretty obvious what the Supreme Soviet in charge of the Labour Party feel about Northern Ireland.

  12. 23 days, chaps. It’s coming home.

    Only if the remainers continue in disarray (which is one type of a “political accident” that I still see as the only route out). They’ll be very focussed now, so we’ll see.

    The general chaos on all sides is encouraging.

  13. PJF–What are you talking about PJF? They are going to get it together and organise a complete UK & NI sellout because it will be such a good look for them and pleasing a crapulous minority of traitors will hand them epic GE defeats?

  14. We are assured that preparations are in place for a WTO exit. If that is correct then exit will not be disorderly.
    As to the pros and cons of a deal, it depends entirely on the content of the deal.
    Maybe if we agreed to hand over remainers in chains we might save some money- and they’re insisting on a deal, any deal, so they’ll be happy.

  15. They are going to get it together and organise a complete UK & NI sellout because it will be such a good look for them and pleasing a crapulous minority of traitors will hand them epic GE defeats?

    If they can, Mr Ecks. It should be obvious by now that they are either deluded about their electoral popularity or just don’t give a shit. They are very committed to the remain cause and prepared to throw anything and everything under the bus for it. Presumably you think so too otherwise you wouldn’t keep wittering on about using the Civil Contingencies Act to stop them.

  16. I fear Tory weakness and “rule of law” cockrot. Not the power of the remainiacs. Their “power” is ONLY the shadow of possible Tory weakness. I already outlined how Johnson could win–IF he has the balls.

    Mercow’s mouth has made BoJo’s job easier–but her “territorial demands” would certainly have me reaching for the CCA –if not war powers.

  17. I wonder if part of the reason that Lib Dem’s don’t want Corbyn as interim PM is they don’t intend a GNU to be in power just for a few weeks to secure an extension and call a GE, as they have stated, but want to keep going for as long as possible and make effectively remaining in the EU an irreversible decision or at least waiting for some of the leave anger to fade or time to try to make the election about some other issue.
    Personally I can’t see leave anger fading at a stitch up, but the remainers in parliment seem stupid to believe that it would and if they can hang on long enough they can get away with it.

  18. BnIc–Yes-if they get a Caretaker Cunt in they will vote NO to a GE on the second vote. And by 2022 every turd over 14 with one foot on UK soil will be voting. Bye bye Brexit and bye bye UK.

    Which is why BoJo can’t afford any of this “we must obey the law” shite. Because it will bring on those who don’t give a rat’s arse about laws but only power.

  19. Boris wants a GE and this statement seems like it will push the cabal in Parliament into making a move sooner rather than later.
    Given their current disagreements on how to even proceed wonder if it’s a strategic move from Cummings to get them to act before they are ready and exploit weaknesses so they end up triggering a GE

  20. Brexit first then GE–a No Deal Brexit neutralises TBP–who will have what they want. There will need to be a new Party to counter BlueLabour in the future but that is for another day. Get Brexit at all costs and then Boris is placed to win a GE.

  21. @PF October 8, 2019 at 12:40 pm


    Full Report


    Robert Peston: blogs.spectator.co.uk/2019/10/angela-merkel-rejects-boris-johnsons-brexit-offer/


    Merkel said: The UK cannot leave without leaving Northern Ireland behind in a customs union and in full alignment forever – Reuters

    She said that [all of] Ireland is the [UK] government’s special problem and Republic of Ireland must have a veto on Northern Ireland leaving

    EU will not accept that the people of Northern Ireland should be asked to consent to the idea of Northern Ireland remaining aligned to EU rules after Brexit

    Once again, EU prove Democracy Verboten

    Donald Tusk “At stake is the future of Europe and the UK as well as the security and interests of our people.”

    Correct, but EU intransigence and desire to punish UK at any cost has led to this.

    As Biw said, we should now leave today

  22. Interesting snippet from someone who is apparently (anonymous source) working on Number 10’s strategy. Via James Forsyth at the Speccy: https://blogs.spectator.co.uk/2019/10/how-number-10-view-the-state-of-the-negotiations/

    The negotiations will probably end this week. Varadkar doesn’t want to negotiate. Varadkar was keen on talking before the Benn Act when he thought that the choice would be ‘new deal or no deal’. Since the Benn Act passed he has gone very cold and in the last week the official channels and the backchannels have also gone cold. Varadkar has also gone back on his commitments — he said if we moved on manufactured goods then he would also move but instead he just attacked us publicly. It’s clear he wants to gamble on a second referendum and that he’s encouraging Barnier to stick to the line that the UK cannot leave the EU without leaving Northern Ireland behind.

    There are quite a few people in Paris and Berlin who would like to discuss our offer but Merkel and Macron won’t push Barnier unless Ireland says it wants to negotiate. Those who think Merkel will help us are deluded. As things stand, Dublin will do nothing, hoping we offer more, then at the end of this week they may say ‘OK, let’s do a Northern Ireland only backstop with a time limit’, which is what various players have been hinting at, then we’ll say No, and that will probably be the end.

    Varadkar thinks that either there will be a referendum or we win a majority but we will just put this offer back on the table so he thinks he can’t lose by refusing to compromise now. Given his assumptions, Varadkar’s behaviour is arguably rational but his assumptions are, I think, false. Ireland and Brussels listen to all the people who lost the referendum, they don’t listen to those who won the referendum and they don’t understand the electoral dynamics here.

    If this deal dies in the next few days, then it won’t be revived. To marginalise the Brexit Party, we will have to fight the election on the basis of ‘no more delays, get Brexit done immediately’. They thought that if May went then Brexit would get softer. It seems few have learned from this mistake. They think we’re bluffing and there’s nothing we can do about that, not least given the way May and Hammond constantly talked tough then folded.

    So, if talks go nowhere this week, the next phase will require us to set out our view on the Surrender Act. The Act imposes narrow duties. Our legal advice is clear that we can do all sorts of things to scupper delay which for obvious reasons we aren’t going into details about. Different lawyers see the “frustration principle” very differently especially on a case like this where there is no precedent for primary legislation directing how the PM conducts international discussions.

    We will make clear privately and publicly that countries which oppose delay will go the front of the queue for future cooperation — cooperation on things both within and outside EU competences. Those who support delay will go to the bottom of the queue. [This source also made clear that defence and security cooperation will inevitably be affected if the EU tries to keep Britain in against the will of its government] Supporting delay will be seen by this government as hostile interference in domestic politics, and over half of the public will agree with us.

    We will also make clear that this government will not negotiate further so any delay would be totally pointless. They think now that if there is another delay we will keep coming back with new proposals. This won’t happen. We’ll either leave with no deal on 31 October or there will be an election and then we will leave with no deal.

    ‘When they say ‘so what is the point of delay?’, we will say “This is not our delay, the government is not asking for a delay — Parliament is sending you a letter and Parliament is asking for a delay but official government policy remains that delay is an atrocious idea that everyone should dismiss. Any delay will in effect be negotiated between you, Parliament, and the courts — we will wash our hands of it, we won’t engage in further talks, we obviously won’t given any undertakings about cooperative behaviour, everything to do with ‘duty of sincere cooperation’ will be in the toilet, we will focus on winning the election on a manifesto of immediately revoking the entire EU legal order without further talks, and then we will leave. Those who supported delay will face the inevitable consequences of being seen to interfere in domestic politics in a deeply unpopular way by colluding with a Parliament that is as popular as the clap.

    Those who pushed the Benn Act intended to sabotage a deal and they’ve probably succeeded. So the main effect of it will probably be to help us win an election by uniting the leave vote and then a no deal Brexit. History is full of such ironies and tragedies.

  23. One interesting thing is that quote is “If this deal dies in the next few days, then it won’t be revived. To marginalise the Brexit Party, we will have to fight the election on the basis of ‘no more delays, get Brexit done immediately’.” Probably realistic because they risk being outflanked by Farage if they are unable to deliver by the 31st.

    This strategy is really casting the die and relies on making up for leafy suburban areas, and a possible Lib Dem revival across southern and south-west constituencies, by picking up seats in traditional Labour but Leave-majority areas elsewhere. A decent chunk of 2015/2017 Tory voters very much want a deal – not a majority of them, but a slice they could do without losing if the election is close and remain-voters or deal-preferrers decide to vote tactically. The difficulty with picking up non-traditional Tory voters and seats to replace those losses is that the Tory brand is still not transfer-friendly (they score higher than the other main parties in “would never for” polling), Labour Leave voters rate Brexit significantly lower on their priority list than Tory Leave voters do so are unlikely to switch (particularly so long as Labour maintain their position of equivocation rather than coming out explicitly for Remain) and people who self-report as likely to vote for The Brexit Party express extraordinarily deep unwillingness to vote Tory (to some extent this is because Johnson has already squeezed TBP down by getting eurosceptic Tory-leaners back in the fold, so only the more hardcore remain, but it’s going to be very difficult for him to get a majority if TBP get 10%+ at the next GE).

  24. Tactical voting in the North will do it. Nor are there a vast number of EU sucking shite out there–3 to 4 to 5 million hard core remainiac pricks–but their polls are as bogus as their 3 and 4 times exaggerated march numbers and their bullshit petitions.

  25. Nor are Labour voters as tribal as you think MBE. Brexit is it in this next GE. Jizz is widely hated in the North East and North West. And Mercow’s big gob will have helped greatly. Nothing personal MBE but you are a bloodless calculating worm and millions are not.

  26. @Ecks

    Not all Labour voters are tribal indeed, but that tends to manifest as either tending to stay at home if they don’t feel enthusiastic about the Labour offer, or as defecting to a more transfer-friendly party (this time round The Brexit Party will be expecting to perform reasonably well in terms of vote-share in such seats, but the polling doesn’t suggest they’ll actually be in a serious competition in more than a handful of them).

    The polling picture of strong unwillingness to vote Tory among both Labour Leavers and TBP voters, and the fact that Labour Leavers rate other priorities higher than Brexit, are not good news from the tactical voting perspective. I know you hate polls but that’s also consistent with records from local elections, European elections, and local and parliamentary by-elections – if there is to be the huge swathe of red-to-blue converts that the Tory strategy requires, there’s little sign of them yet, so they’re going to have to get pulled out of a hat at just the right moment. That’s a cross your fingers and hope job at the moment, though I can see the proposed spending splurge is partly targeted at them. I do agree that tactical voting is going to be crucial and the worry is that Labour, Green, Lib Dem and hardcore Tory-leaning Remainers may be more willing to switch to achieve their aim.

    My main hope at the moment is that parliamentary Remainers or the EU or both do something really profoundly stupid and ignite the rage of Leave voters. At the moment, Remain voters have more motivation and momentum. The Merkel quote is pretty good. More MPs calling Leave voters uneducated racists would also be handy, but there’s been plenty of that already and it hasn’t proven decisive just yet. A move towards Revoke might prove the tipping point, but that’s a bit of an elephant trap so not sure how many MPs will go down that route – certainly not a majority even of Remainers, but maybe enough to raise some alarms.

    A good old row between Labour and the Lib Dems (and maybe the Greens) would be helpful in making them less transfer-friendly. Or internal ructions. The LD parliamentary party has swallowed up a lot of Tories lately and even though it was mostly wets, they’re no longer so distinctly left-of-centre – the Phillip Lee defection triggered some “homophobia” resignations in the LD LGBT wing, but that quietened down pretty fast. Perhaps a more centrist LDs would be less attractive to left-wing potential tactical voters. Maybe Labour will cock up the balance and become too explictly Remain-backing to carry some of their Leave-backing constituencies, or will go the other way and be too equivocal on Brexit to gain LD/Green switchers. A blame game between Swinson and Corbyn about why the government couldn’t be brought down sooner might raise suspicions among Remain voters that one or maybe both parties are more interested in power-play and less in doing whatever it takes to prevent Brexit. Like @PJF, I’m hoping the current lack of coordination is laying down the groundwork for more chaos to come and that may open up some opportunities.

    The next election is very likely to be swung by tactical voting between Leavers and Remainers, and our party system is probably years overdue realigning with the main political fault-line. Ecksy’s 100% correct that if the Tories can mobilise Northern Leavers they should take the election, and deservedly so – that would be a serious feat. If both sides struggle to achieve their optimal tactical allocations, though, then I’m pinning my hopes on the Greens, LDs and Labour wasting a lot of each other’s votes in seats the Tories manage to come through the middle.

    Would love to know what Farage will do if the Tories explictly back No Deal. Will it be too tempting to have a last bash at destroying the Establishment or will he back off to avoid becoming The Man Who Accidentally Stopped Brexit?

  27. “At the moment, Remain voters have more motivation and momentum.”

    How do you get to that statement MBE? I know loads of folks at boiling point with the EU and ZaNu as well. Sure “everybody I know etc”–but folk aren’t thinking about “What is that cunt Jizz going to do for me–aside from Brexit?”

  28. @MyBurningEars October 8, 2019 at 9:00 pm

    James Forsyth: Varadkar doesn’t want to negotiate. Varadkar was keen on talking before the Benn Act when he thought that the choice would be ‘new deal or no deal’. Since the Benn Act passed he has gone very cold

    Correct. Benn’s Surrender Act meant no point in EU negotiating as they could respond with 3 month, 3 year, 30 year extension and Johnson compelled to accept

    Not keen on assassination, but Benn, Bercow, Grieve and Letwin deserve it for their colluding with a foreign power treachery

    Re Northern Vote – Johnson must make a covert agreement with TBP – Con candidate ill and withdraws etc

  29. Worth watching:
    Nigel Farage meets Rod Liddle

    Yes indeed. Rod Liddle and our Steve both make me laugh with their wordsmithery but I fear Rod is the Brexiteer with the better insight into the forces we’re up against.

    They’re all political hack scum, including Boris and Cummings. I still say the only hope for Brexit is that all the bastards’ various combinations of greed and incompetence will lead to a political accident in which they run out of time to stop it this month.

    But that’s unlikely. And as Liddle points out, what is likely is that we’ll be disappointed with the results of the subsequent GE.

  30. A decent chunk of 2015/2017 Tory voters very much want a deal

    True. But now it is clear there is no deal available.

  31. Bloke in North Dorset

    If that leak to James Forsyth want directly from Cummings it was by someone who he’d briefed on what to say and probably signed off on the final wording, so we can take it that they were sending a message to the EU.


    In this game of 4 dimensional political chess Cummings also has to consider who gets on the Conservative ticket. No point in having a majority of 30 if 20 of them are going to bottle it when it comes to the crunch.

  32. A decent chunk of 2015/2017 Tory voters very much want a deal

    I’m as hardcore a BRExiteer as you can get and I would be very happy to get a deal with the EU, but I’ve always known that this was unlikely to be agreed and even if agreed (which it essentially was in the form of Treason May’s capitulation treaty), then it would never get ratified by both the UK parliament and the EU, which is where we are right now.

    Treason May’s capitulation treaty is the only thing on offer and it is deliberately structured to be worse in many ways than remaining in the EU on our current terms. Even if Boris had been elected in 2017, I suspect that the EU offer would be similar to what it is now, since to offer the UK what it deserves (essentially a Canada+ type arrangement of relatively free trade without the dead hand of regulation, free movement and Merkel’s economic immigrants) would be to make EU membership not just worthless, but an actual financial and political encumbrance, which is what it is.

    So here we are yet again, with another extension deadline looming and no deal on the table that is worth having.

    Can we leave yet?

  33. Only the use of emergency powers can stop their attempted coup. Yes the remainiac scum all hate each other with good reason–but that won’t stop their plan. VONC–install some POS–then vote down a GE on the 2nd vote –and two years of voter importation/extension to finish Brexit and the UK for good.

    In the face of that only a fucking imbecile would by peeing their pants about “rule of law”. The only chance of that EVER being retained is to make sure the EU do not gain ascendency via their tame creatures.

  34. We don’t need any war other than the one we are in Mr Galt. Win that and we are set fair to win the ones to come. WE MUST–or there is no future for anyone outside of the globo “elite”.

    Remember –they are not EVER going to just leave us alone. They have plans and those plans are ALL bad news for ordinary folk who just want to get on with their lives.

  35. @John Galt

    At what point can we declare war on Germany and hang the traitors?

    Given their air force has ~6 combat capable fast jets, none of their subs are seaworthy, their MTBs mostly broken and Army using broomsticks as guns; Sunday 05:00 would be best as most will be off duty and pissed. Should be over by midnight.

    One can understand why Trump pissed of at Germany free loading on NATO

  36. Johnson needs to call out Economically & Militarily weak Merkel

    Germany’s ailing economy can’t afford a no-deal Brexit

    Berlin is on the brink – and a fresh eurozone crisis is looming; Liam Halligan
    The UK was the ‘sick man’ when we ‘joined Europe’ in 1973. Now, with Britain on the cusp of leaving, the European Union’s largest economy is decidedly out of sorts. After failing to recover over the summer, Germany is now almost certainly in recession. The state of the fourth biggest economy on earth always matters — but with Germany dragging down the broader eurozone, its declining health could decisively impact Brexit negotiations too.

    Politically, Brussels and Dublin are bullish. They have dismissed Boris Johnson’s proposals, gambling on an extension and perhaps Brexit being cancelled entirely. But such intransigence could yet cause a disorderly no-deal Brexit — which would have a pretty big impact on all major economies on the continent. With the eurozone on the edge of financial meltdown, the EU’s ailing economy needs a no-deal Brexit like a hole in the head.

    Germany has long been the beating heart of the eurozone. But that economic pulse has been getting weaker. The German economy shrank between April and June, the second contraction in less than 12 months. Preliminary data for the third quarter, July to September, shows the country’s mighty manufacturing sector rapidly declining.

    To make matters worse, Germany’s new services sector orders just fell for the first time in five years. Its neighbours look on in horror, knowing what a German slump might mean for them. They want Angela Merkel to embark on a debt-fuelled spending splurge to stave off a region-wide recession. She resists, insisting that Germany’s ‘culture’ is to avoid running up debt.

    Merkel faces the dilemma at the heart of her country’s body politic — and its key role within the single currency. If she is to boost Germany’s economy, spreading growth across the eurozone, the nation’s instinctive economic caution must be overcome. And it’s about more than just Germany. How Merkel responds to recession — allowing a no-deal Brexit to happen or taking steps to prevent it — will impact not only the UK’s EU withdrawal. It could determine whether monetary union survives.

    Germany is, to some extent, a victim of its own success. Its formidable export machine consistently generates trade surpluses equal to a massive 8 per cent of GDP — a projected $276 billion (£225 billion) this year, the biggest in the world. Yet heavy export reliance explains this dramatic domestic slowdown. When the global economy turns sour, there’s less demand for German wares.

    At the last count, German export orders were dropping at the fastest rate for ten years. Tit-for-tat US-China tariffs mean cars made by German firms in America are more expensive when exported to China, at a time when Chinese car demand is plunging. Two-fifths of VW’s global sales are in China, and a third for Daimler and BMW — with German brands accounting for a quarter of all Chinese car sales. All that, plus the emissions scandal, is hammering German carmakers, whose output nosedived last year, weighing on the wider economy.

    China might grab the headlines, but a fifth of German car exports are sold in Britain — the market with the highest profit margins. A no-deal Brexit could halve total exports to the UK, according to Germany’s respected IWH Institute, shattering domestic supply chains and costing 100,000 jobs.

    Things became worse when the World Trade Organisation last week ruled that the aero-plane manufacturer Airbus has received illegal subsidies for the past 15 years, paving the way for the US to hit the EU with goods tariffs of up to 25 per cent as soon as next month. Successive shocks to Germany’s car industry add up to a major problem. The combination of a no-deal Brexit, plus heavy US tariffs, could do systemic damage to an industry vital to Germany and the eurozone.

    Germany’s recent export success has been built — in part — on a cheap currency. Ahead of the euro’s 1999 launch, weaker currencies such as the Italian lira and Spanish peseta were hyped up, while enduing reunification costs tempered the German mark. So monetary union ‘locked in’ Germany’s competitive advantage, while lumbering less productive countries with an inflexible currency that was far too high.

    This initial mispricing explains why the Italian economy has barely grown over the past two decades, with Greece shrinking by 25 per cent. The euro crisis of 2011-12 drove down the single currency against the dollar — extending Germany’s currency advantage to the global marketplace too. As Germany prospered, southern eurozone nations suffered. Then came the ignominy of the Club Med economies being bailed-out by Berlin, which to assuage its own electorate imposed repayment conditions that were inevitably breached — spreading discontent all round. Designed to promote Europe-wide prosperity and unity, monetary union has instead spread nationalism and mutual distrust.

    Now, with Germany itself on its economic uppers, and eurozone bond markets distressed, there is massive pressure for policy stimulus. Having done so well out of eurozone membership, at the expense of others, Germany is now expected to show ‘solidarity’ with weaker states.

    The European Central Bank cut interest rates again last month and returned to quantitative easing, churning out another €20 billion a month for the foreseeable future. But more ECB funny money could easily backfire, spooking financial markets more than it calms. Driving eurozone rates even further into negative territory (the base rate is now minus 0.5 per cent) also makes life harder for the eurozone’s fragile banking sector. The region’s stock of dodgy (non–performing) loans is three times higher than in the US and four times that of Japan. The likes of Greece and Cyprus remain the worse culprits, but Germany’s banks are not immune. Shares at Deutsche Bank remain over 90 per cent below their pre-crisis peak, as traders question the stability of this European banking lynchpin. Yet, by eating into profits, the ECB’s latest rate cut makes eurozone bank balance sheets even weaker.

    Such monetary quackery certainly upsets Germany, where memories of inter-war hyperinflation, and resulting political chaos, run deep. A previously obscure ECB internal accounting system known as ‘Target-2’ — showing massive IOUs being racked up between Germany and weaker eurozone members — often features in the popular press. German tabloid Bild portrays Italian ECB supremo Mario Draghi as a vampire: ‘Count Draghila, sucking our accounts dry.’

    Any Berlin-boost, then, will be fiscal — lower taxes and/or higher spending. Germany has pretty low national debt, having run budget surpluses since 2013, so Merkel does have scope to act. She faces, though, a national aversion to borrowing, known as schwarze null, or black zero — a deep-seated cross-party belief in balanced budgets, another reflection of Germany’s tumultuous past. Such caution would limit any German stimulus, to the dismay of the French. Many in Germany now question the black zero logic. ‘In a fragile economic situation, black zero should be put under review,’ says Joachim Lang, director-general of the BDI industry group, a bastion of German conservatism. ‘German fiscal policy must change.’

    After all, with negative bond rates, markets are offering to pay, to lend money to German government. A €50 billion growth package has been officially mooted, but only if recession happens. Waiting for the slump before you act risks serious damage to business and consumer sentiment. And €50 billion isn’t much — less than 1.5 per cent of German GDP.

    What’s clear is that a fresh eurozone crisis is looming — and it could be a lot more serious than in 2011. Back then it was the economic minnows in trouble — Greece, Portugal, Ireland. This time, much bigger economies could face bank runs and crises of confidence. A eurozone implosion sparked by Italy, for instance, would roil global markets, risking a 2008 re-run.

    Italian banks have bought at least €360 billion of domestic government debt, representing over 10 per cent of bank assets. This has created a ‘doom loop’, with the state itself heavily exposed in any banking crisis. Even the eurozone authorities would struggle to fund any Italian rescue-plan — giving Rome kamikaze bargaining power in its ongoing budget rows with Brussels. During the last crisis, too, Draghi could credibly promise to do ‘whatever it takes’, cutting rates and dousing down bond and equity markets with QE cash. Now, government debts, across the board, are much higher. And with rates already negative, and endless QE a given, the ECB’s medicine cupboard is bare.

    Unless Germany takes bold fiscal action, boosting growth elsewhere, we can expect populist Euroscepticism to rise in Italy, France and Germany itself. That could cause bond markets finally to crack, the ECB unable to stop the patient from slipping away.

    Which brings us to Merkel’s dilemma. Driving forward the ‘European project’ is central to Germany’s modern political identity. But so is staunch fiscal restraint. Both orthodoxies have their roots in the extremes and excesses of 20th century German history. But to adhere to one sacred commitment — a balanced budget — Berlin may have to sacrifice the other: preventing a eurozone implosion by unleashing a debt-fuelled spending boom. On cue, the French are cranking up the pressure. Finance Minister Bruno Le Maire just condemned Germany for a ‘total lack of investment in the eurozone’ — only the latest sign of tension between Merkel and Emmanuel Macron. The French President has previously denounced Germany’s ‘perpetual fetish for budget and trade surpluses… always at the expense of others’.
    Amid civil unrest and continued ‘yellow jacket’ agitation (what, you didn’t know?), Paris accuses Berlin of having the money to do more but refusing. ‘We must not wait until the economic situation worsens to make the necessary decisions,’ says Le Maire.

    For several years, France has appealed to Germany to invest more to ‘stabilise’ the eurozone — that is, write off inter-eurozone debts and spread cash across the continent, including to France. Now the Elysée is looking its own furious street protesters in the eye and telling them it’s all Germany’s fault. The European Commission on Wednesday added its voice, calling for ‘pre-emptive, rather than reactive’ fiscal policy — which only Germany can deliver. It is against this background that Berlin, and all EU governments, must consider if they want the additional economic fall-out from a no-deal Brexit.

    ‘The economic sky is not cloudless,’ Merkel remarked when she met Boris Johnson in Berlin over the summer — adding that Brexit is ‘already causing us headaches’, so an ‘orderly withdrawal is preferable in every respect’.

    For the German Chancellor, holding the economic future of the continent in her hands, this is the worst possible time for talks with the UK to collapse. Boris Johnson should remember that. Despite the latest brinkmanship, Merkel remains his best ally in securing any last-minute Brexit deal.
    (C) The Spectator, 2019

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