IMF’s Lagarde Repays Osborne

Osborne-and-Lagarde-008.jpg

IMF chief Christine Lagarde – currently due to stand trial over a €400 million fraud case – has been spinning overtime that Brexit will damage the UK. This is merely a geo-political courtesy return favour to Osborne who campaigned hard for her to get the IMF chief’s job.

In reality the IMF figures predict that UK growth will outpace both Germany and France as well as the Eurozone as a whole. Even the short-term initial Brexit effects are marginal, and the Bank of England will stand ready to flood liquidity into the markets in the event of Brexit, which will have a soporific effect on markets. No credible economic forecaster expects any long term negative effect on growth…

UK Deficit Still Bigger Than Greece’s

New figures published by the IMF yesterday report Britain’s government deficit this year will still be bigger than Greece’s. The UK’s deficit in 2015 will be 4.25% as a percentage of GDP – Osborne’s preferred metric – while Greece’s will be 4.17%. The only advanced economy with a higher deficit than the UK this year is Spain…

Before the election Osborne was skewered on how Britain’s deficit compares with Greece in his worst TV appearance of the campaign. For all the talk of austerity and swingeing cuts to tax credits, the Chancellor has failed to meet his deficit targets or match the rest of the developed world…

H/T @edconwaysky

Osborne to IMF: I Told You So
Third Year of Expansionary Fiscal Contraction

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Chancellor Zero is no more. Growth is back, even the neo-Keynesians at the FT and the wonks at the IMF can’t deny that the UK expanded faster than the rest of the G7 last year and will probably do the same this year. George Osborne is in Washington today to gloat that

“despite warnings from some that our determined pursuit of our economic plan made that impossible. All of this demonstrates that fiscal consolidation and economic recovery go together, and undermines the pessimistic prognosis that only further fiscal stimulus can drive sustainable growth. Indeed that is precisely the wrong prescription for our economies…”

Ed Balls got it wrong is the core message. Labour will point to per capita GDP which is still 10% lower than it was in 2007 – that will be a second term objective for the Chancellor. Balls will less convincingly say George has missed his deficit target, less convincing because Labour would have missed it by more and opposed almost every measure needed to reduce the deficit. The neo-Keynesian argument that higher unemployment would increase the welfare bill and thus the deficit has been proven to be wrong. Unemployment is down from what it was under Gordon Brown, with the warnings from the likes of David Blanchflower of 4 to 5 million unemployed having turned out to be political hyperbole that has fatally damaged his career as a sage. That “expansionary fiscal contraction” that left-wing wonks and economists said would never come is entering a third year…

Leading left-wing wonk and wannabe Labour MP Will Straw argued in 2011 that Britain’s economy faced the risk of a Japanese-style “lost decade” and that “expansionary fiscal contraction” was a “voodoo theory”, and even that there was no such thing as an expansionary fiscal contraction. In 2011 Guido argued the point at length with Will on the BBC’s Daily Politics:

Having failed at the time to get an on-air apology from Will for his role in Gordon Brown’s Treasury, three years later he must now accept that he was wrong about a lost decade and wrong that there was no such thing as an expansionary fiscal contraction. Over to you Will – as growth is expected to hit 3% you have a second chance to offer an apology…

Osborne’s “Clear Position” on the IMF

This £10 billion bailout for the IMF brings the total Osborne has pledged to £40 billion, or some £666 for each and every man, woman and child in the Britain. In October last year after British taxpayers sent £9 billion to the IMF – £9 billion that Osborne had to borrow, Osborne told the House of Commons categorically:

“Britain will not be putting money into the bail-out fund either directly or through the IMF…. The IMF exists to support countries, it does not exist to support currencies… The IMF contributing money to the eurozone bail-out fund, no; Britain contributing money to the eurozone bail-out fund, no. That is Britain’s clear position.” 

The Chancellor could not be any more clear, he gave his word, it was an unqualified promise. Which Osborne has now broken.

Ed Balls lines up with Obama saying…

“The IMF should not become the de factor central bank of the eurozone. That is the principled position Labour and the US government have taken and why we voted against increased funding last summer.”

Not a Single Billion More

George Osborne gave a cast iron promise last October:

“Britain will not be putting money into the bailout fund either directly or through the IMF… the IMF exists to support countries, it does not exist to support currencies. The IMF contributing money to the eurozone bailout fund, no; Britain contributing money to the eurozone bailout fund, no. That is Britain’s clear position.”

Ed Balls and Tory backbenchers are at one on this, it is for Germany through the ECB to support the €uro. The American and Chinese Treasury ministers agree, it is not the purpose of the IMF to bailout an ill-conceived currency union. Don’t forget your promise George*…

*Guido hasn’t forgotten his IMF promise.

Osborne Backtracks

With the Greek government splitting on the referendum promise last night, today’s G20 summit is going to be even messier with the prospect of a snap Greek election now not out of the question. Papandreou says the referendum is about how the bailout, and the conditions that come with it, could be fed to the Greeks.

What is clear is the European political elite wants more bailout cash…

Two weeks ago Osborne told the Commons:

“Britain chose not to join the euro and the British Prime Minister has fought hard to get Britain out of the bail-out fund to which the previous Government signed us up. I want to make it clear that whatever the Commission President says, British taxpayers will not be contributing to the eurozone’s bail-out of Greece—full stop.”

Yet overnight we learn that Britain is gearing up to give more money to the IMF in a futile effort to try to keep Greece in the Euro. Surely this is a change of tune from just last week when Osborne said:

“Britain will not be putting money into the bail out fund either directly or through the IMF… the IMF exists to support countries, it does not exist to support currencies. The IMF contributing money to the eurozone bail out fund, no; Britain contributing money to the eurozone bail out fund, no. That is Britain’s clear position.”

We’ll be sure to believe you next time you make Britain’s position clear, George.

Quote of the Day

George Osborne told MPs…

“Britain will not be putting money into the bail-out fund either directly or through the IMF…. The IMF exists to support countries, it does not exist to support currencies… The IMF contributing money to the eurozone bail-out fund, no; Britain contributing money to the eurozone bail-out fund, no. That is Britain’s clear position.”

IMF Wants More

Back in July the government won a vote to send £9 […]

+ READ MORE +

Osborne’s Bumpy Ride

Though both the IMF and the Treasury are quick to stress that deficit reduction is the right thing to do, it’s not going to be as pleasant as the Chancellor will have us believe. Ronald Reagan asked to be judged […]

+ READ MORE +



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Quote of the Day

Preston Council leader Peter Rankin explains rising anti-Semitism…

“You need to think why this anti-semitism is getting worse. It’s because of the actions of the IDF shelling schools and hospitals and killing and maiming thousands of men, women and children.”

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