Britannia Radio

The first article below is a good illustration of how in every 
detailed matter Gordon Brown turns a dangerous situation into a 
crisis.  It seems that all those vastly expensive initiatives have 
been announced but without the necessary warning that This policy 
depends on permission from the EU in Brussels".

So we are now in a situation where we do not actually know what the 
settled policy is!  No company can plan or even exist if it doesn't 
know what taxation and government 'support' (=hand-outs) is to be and 
until it has that money in its hand it grinds slowly to a halt.  This 
is terminal incompetence.

The second is a powerful argument for Free Trade when so many are 
frightened and seek 'protection'.

In the third Richard North argues that 'economic nationalism' is 
coming back to the forefront.  This militates against the 
bureaucratic stranglehold of Brussels (article one below) and makes 
an uneasy bedfellow with the ant-protecrtionist argument (article 2 !)

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FINANCIAL TIMES   5.2.09
Jobs fear as state aid application delayed
By Jean Eaglesham in London and Nikki Tait in Brussels

The UK has yet to apply to Brussels for the state aid approval 
required for more than £310bn of promised state support for banks and 
business - in spite of ministers stressing the urgency of the 
initiatives, the Financial Times can reveal.

Businesses warned on Wednesday that the delays and uncertainty 
surrounding the Treasury and Department for Business support packages 
were exacerbating the effects of the recession. Jobs could be lost 
unnecessarily because of the lack of clarity surrounding the 
government's proposals, the leading employers' organisation suggested.

Government packages unveiled last month that support the car 
industry, lend to business and bail out the banks for the second time 
cannot be fully implemented without state aid approval for at least 
some of the elements
.
But the government has yet to submit the notification to the European 
Commission needed to start the formal approval process for any of the 
schemes announced recently that need state aid clearance.

Other elements of the government's recessionary packages are also 
being hit by delays. The Treasury pledged on January 19 that a £50bn 
scheme for the Bank of England to buy corporate paper and other 
assets "will come into effect from February 2". But officials told 
the FT on Wednesday that a Bank notice on asset purchase this week 
will be of a "consultative nature" and the scheme will not start 
immediately.

The CBI employers' body said on Wednesday it supported the 
government's "important and right" measures to try to bridge the 
funding gap left by the withdrawal of foreign banks from the UK 
market. But Richard Lambert, CBI director-general, said he was 
"concerned" by the lack of clarity on the substance and timing of the 
schemes, such as the package to insure toxic bank debts.

"They haven't communicated [the support] in a way that commands 
confidence .. . . we need a better picture than we have yet," Mr 
Lambert said. The organisation is urging ministers to produce a grid, 
setting out the expected steps to implement fully the support.
"People at the moment are still having to take decisions without 
knowing what the credit availability will be in a few months' time. 
That's why they're being ultra-cautious," Mr Lambert said. "If the 
government could nail down [when the schemes will take effect], give 
a sense of confidence that this is manageable and can be managed, 
people could afford to wait [before cutting costs]."

Ministers are adamant that intense work is going on behind the scenes 
to finalise the packages, including initial discussions with Brussels 
officials to pave the way for state aid approval. The Department for 
Business said it had started talks with the Commission on car 
industry support "the day after" Lord Mandelson, business secretary, 
unveiled the proposed £2.3bn of guarantees on January 27. The 
notification would be submitted "very shortly," officials said on 
Wednesday.

The government is keen to stress the few recently announced measures 
that are already in place. The enterprise finance scheme to back up 
to £1.3bn of loans to small business had "got off to a good start", 
Lady Vadera, the business minister, told a business audience this 
week. "£12m [has been] disbursed in just its first two weeks, which 
we hope will accelerate rapidly."

But small business organisations expressed continued frustration with 
the pace at which bank lending was being freed up. "It's very 
slow . . .?[the money] is trickling through but it's not happening 
quickly," said Stephen Alambritis of the Federation of Small Businesses.

+ Nat West and RBS announced on Thursday an additional £3bn of 
funding for small business customers as part of the banks' commitment 
to increase lending to borrowers. The bank said the funding was a 
commercial decision and not connected to the government's bank 
recapitalisation programme.
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TELEGRAPH    5.2.09
Let's hope policy-makers have learnt the lessons of the Great Depression
There is a slow-motion inevitability about the way the global 
economic crisis is unfolding. Although there are as many differences 
as similarities between the situation today and the catastrophe of 
the 1930s, the chapter headings of the earlier slump are starting to 
look familiar.
 
By Tom Stevenson

Chapter one: debt-fuelled consumer binge. Chapter two: stock market 
slump. Chapter three: credit crunch. Chapter four: trade war. Chapter 
five: well, let's not go there. History does not have to repeat 
itself, despite its rhymes. Extremism and war concluded the slump of 
70 years ago, but they needn't this time.

So far, we have followed the plot-line of chapters one to three 
pretty closely so we should think seriously before turning the page 
again. It's bad enough that we have followed the story this far.

The "Buy American" clauses under consideration for President Obama's 
$800bn stimulus package and the unedifying scenes at the Lindsey 
refinery over here hint at where we might be heading. And while 
everyone who is worried about their own job may understand the 
strikers' emotions, most will realise that what they are doing is 
fundamentally wrong. We must do all we can to avoid the populist easy 
fix of protectionism.

Economic slowdowns provide fertile ground for misguided attempts to 
protect one's own. It is hardly surprising, with global trade in a 
deep slump, unemployment rising and manufacturing output in freefall, 
that governments, workers and bosses alike might want to throw up the 
barricades. They should resist the temptation.

International trade, a key component in the growth of the global 
economy over the past 30 years, has collapsed. The Baltic Dry Index 
of shipping rates is down 90pc in 18 months and the flood of exports 
from Asia has slowed to a trickle. Despite this, the consensus view 
is that a return to the Smoot-Hawley protectionism of the 1930s is 
unlikely. Policy-makers have supposedly learnt the lessons of the 
Great Depression. I am not so sure.

Protectionism comes in many forms. Moves to protect domestic 
industries, beggar-thy-neighbour currency devaluations and "fiscal 
free-riding" are as damaging potentially as import duties and all 
three should be challenged.

For example, not a penny of the billions being thrown at Detroit is 
finding its way to Toyota, an employer of many thousands of American 
workers. While bail-outs are arguably a necessary evil, "patriotic" 
buying helps no one.
Competitive devaluations are another threat that should be resisted. 
The fall in sterling prompted other countries in Europe unfairly to 
cry foul at Britain. Timothy Geithner, Obama's new Treasury 
Secretary, was on firmer ground when he accused China of holding down 
its currency to protect its exporters.

Finally, pressure should be applied to countries such as China and 
Germany not to hitch a free ride on other countries' tax cuts in an 
attempt to export themselves out of trouble. The world's big surplus 
holders should instead encourage domestic demand at home and build a 
meaningful safety net so that their people can unwind the excess 
savings [Eh?  What does he mean? -cs] at the heart of today's crisis.

The main reason to resist protectionism, however, is that it does not 
work. It takes away the incentive for businesses and entire countries 
to pursue excellence. Instead it rewards mediocrity.

Protectionism supports inferior products and services and raises 
costs. Worse, it tends to look most tempting when it is most 
dangerous, in times of economic distress. Because it is so easy to 
copy, protectionism from one country can quickly descend into a tit-
for-tat erection of barriers that benefits no one and takes years to 
undo.

It has been argued that protectionism is essential for newly 
industrialising countries. It is furthermore suggested that 
protectionism was not the cause of the Great Depression but a by-
product of it. Most worryingly, it has been said that the trick in a 
downturn is to get your protectionism in first, as Britain did in the 
1930s, with a system of "imperial preference".

All of this may be true but cannot disguise the fact that an upsurge 
in protectionism would make the world a less efficient, more 
expensive, lower growth and more dangerous place than one built on 
the principles of free trade and open markets. With the courage to 
face down the siren call of protectionism we can still slam 
Depression: the Sequel shut and put it back on the shelf.
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EUREFERENDUM Nlog   5.2.09
Unravelling

An intriguing article in The Financial Times pulls together some of 
the recent events, under the label "protectionism" and concludes that 
we are looking at "economic nationalism".

Examples it gives are the strikes against the use of foreign workers 
in the UK; French carmakers told to buy domestic components and not 
close factories in France; and a minister in Spain urging consumers 
to buy Spanish. It also notes that many of the banks which have been 
bailed out by their national governments are now under considerable 
pressure to lend to local enterprises rather than play the 
international market.

The piece is rather convoluted but what stands out is a comments that 
some of the financial integration that EU policymakers laboured to 
promote during the good times has already been rolled back by the 
current crisis.

One such is the splitting up along national lines of Fortis, the 
Belgo-Dutch finance group. Bank bail-outs have had similar effect, 
such as with France offering to inject ?21bn into the country's six 
largest banks to ensure they were not at a competitive disadvantage 
to UK or US rivals.

Then we get Nicolas Véron of the Bruegel think-tank in Brussels 
saying that, "There is a very strong law of unintended consequences 
taking place after all the bank bail-outs. We will see more and more 
activist government policies that distinguish economic activities 
according to the nationality of the actors." It should be a big 
concern to everybody, he adds.

To put the icing on the cake, we then hear from Daniel Gros of the 
Centre for European Policy Studies. He says: "The consequences of 
such protectionism are likely to test Europe economically, 
politically and legally . Unravelling the integration of the banking 
market will cause a lot of damage."

"Unravelling" is a word I love to hear. The "colleagues" are getting 
a tad worried. In highly technical ways, that are far from clear, 
step by step, the "project" is being dragged backwards. The "British 
jobs for British workers" strikes were just a start.

For decades, the colleagues have been telling us that the process of 
integration is "inevitable" - unstoppable even. But the fact is that, 
when the chips are down, self-interest comes to the fore. Call it 
"economic nationalism" if you like. A better name for it is simply 
nationalism. It is the only thing that works, and it looks like its 
coming back into fashion.
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Posted by Richard North
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POLITICS HOME     4.2.09
Treasury Select Committee

The Banking Crisis: The role of the media

Robert Peston, Lionel Barber, Alex Brummer, Jeff Randall, Simon 
Jenkins at the Treasury Select Committee

Mr Peston denied causing the run on Northern Rock, and was supported 
by the other four journalists questioned by the Committee. He refused 
to talk about his sources, but denied preferential access to 
information.

Asked about his access to insider information Mr Peston said, "I do 
not have a pass to the Treasury. I'm simply not going to get into who 
I talk to about any story. I talk to lots and lots and lots of 
people. I have never felt that I was in receipt of preferential 
access to information.

"I have delayed publication until I was absolutely certain of 
material information. In 2003 I was concerned about Northern Rock. 
When markets, wholesale markets, closed down in 2007 this was a bank 
that I kept a very close eye on. There came a moment, September 13th, 
when I felt the pieces fit together."

Asked about Robert Peston's scoop on Northern Rock:

Peston: "There is a public interest in letting millions of people 
know what's going on with their banks and the economy. We do not 
broadcast, or put on the blog, without giving it huge amounts of 
thought. We go through a massive verification procedure. The issue 
for me is the counter-factual.if we had have delayed what would the 
impact have been. I would argue strongly that where they are today is 
where they would have been had we not shared the information with  
public. I'm not sure they would have been any different."

Randall: "He was perfectly justified in putting out the story when he 
did."

Barber: "There were rumours going round for months about Northern 
Rock's financial health, but nobody wrote about it because they were 
rumours. Northern Rock was operating a flawed business model and were 
caught. Nothing the BBC, and the way they reported, made a difference."

Jenkins: "I think those people involved can legitimately saying they 
were acting in a considered fashion. I much more worried about the 
blogosphere where anything can go out."

Brummer: "The tone of the report, rather than the content of the 
report, may have made people a little unsure of what was going on. 
But the response was a consequence of the poor systems Northern Rock 
had. When I look back at the situation now I think Robert did 
everyone a big favour."