A perfect (euro) storm?

Thursday, April 09, 2009

A perfect (euro) storm?

For years now, an Irish friend – not particularly political – has made a point in every conversation of complaining about the euro, driving up prices and making business difficult. With that, and the general management of the Irish economy, it was pretty obvious that the "Celtic Tiger" was due for a fall. The only question was "when".

It now looks like that "when" has happened – or is about to happen in a big way, with the government having announced an emergency austerity budget and now, according to The Guardian, Irish bank shares taking a nosedive "as fears grow over financial crisis".

This, or course, the financial crisis that the collective brains of the EU, the G20 and any number of alphabetical soup organisation are supposed to be sorting, the only problem being that every time they "sort" it, things seem to take a lurch for the worse.

As it stands in Eire, this former glittering economic star has the worst public finances in the euro zone, to the extent that the EU commission has become increasingly concerned that it, along with Spain and Greece, represents a threat to the euro's stability.

Cue Anatole Kaletsky in The Times who seems to be deputising for Ambrose Evans-Pritchard in the Armageddon states, telling us that the eurozone is bracing itself for the perfect storm. Further, he asks, if a financial emergency required immediate action, could Europe cope? That, he says, is the big question for the world economy

Setting out a dire tale of woe, which spans the usual culprits, from Ireland, though Greece and Spain, Kaletsky alos takes in Peer Steinbrück, the German Finance Minister, who, despite his swaggering boasts about the triumph of the Rhenish social-market model over Anglo-Saxon capitalism, presides over the weakest leading economy in the world outside Japan.

Europe, he wites - even more than America or Britain - is caught in the global financial storm and if the world suffers another blow in the months ahead, comparable to the collapse of Lehman Brothers, it is most likely to involve a crisis in the eurozone. Is it possible, he then asks, that Europe, whose biggest economies - Germany, France and Italy - never experienced an Anglo-Saxon style housing and credit boom, will suffer more damage than Britain or the US?

After much more verbiage, we eventually come to the point. Yes there is likely to be a crisis but Germany will probably come to the support of the eurozone casualties. Thus, an "existential crisis" of the eurozone remains unlikely. 

But herein lies the intriguing prospect. In a variation of the theme, the spirit is willing but the flesh is weak, Kaletsky poses the scenario where an emergency package had to be organised over a single weekend in response to a European crisis. Is it obvious, he asks, that the EU and Germany would cope any better than the US Government did in the Lehman collapse last September?

That is a question nobody seems to be asking - which probably makes it the biggest risk facing the global economy today, concludes our man. And that is indeed an intriguing thought. By the time the great European supertanker has started to turn, the waves could have swamped it.

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Wednesday, April 08, 2009

What is the price of neglect?

Possibly of far more significance that the venality or otherwise of our MPs and their expenses claims, it this piece of news offered by The Times on their attendance in Select Committees.

Headlined, "MPs failing to attend crucial Commons committees", the story tells us that backbench MPs are routinely skipping meetings, "undermining Parliament's power to scrutinise the government."

In terms of detail, we learn that at least 60 of the 220 members on the most influential Commons committees examining public services and government spending missed more than half their meetings last year.

We also learn that several backbench MPs have told The Times that they do not regard select committee attendance — which was once seen as a route to high office — as a priority. This, says the paper, has prompted anger among some select committee chairmen who believe that backbench MPs from all parties are shirking their elected responsibilities. 

On this blog, we ourselves have often pointed out the vital role of these committees, where much of the real work of scrutinising the executive. The Times is of the same mind, noting that: "Select committees are seen as a vital part of the parliamentary process, cross-examining ministers and other experts and producing reports to which Whitehall departments must respond." It also notes that, last year select committee members went on 49 foreign trips at a cost of £1.4 million. 

Yet, we are told, overall attendance at several key select committees covering education, foreign affairs and culture have dropped 10 per cent in five years. The attendance rate for the main committees is 64 percent, down from 70 percent in 2002-03. 

Tony Wright, the chairman of the Public Administration Committee, tells us: "There is no reward for being a diligent select committee member." Thus, MPs now openly pick and choose which meetings they attend with impunity. 

The paper goes on to "name and shame" some individuals, the short list produced being damning enough in its own right. But, inevitably, the paper can only look, in effect, at quantity. It cannot look at the quality of the work produced. This, we have attempted to do, on several occasions and have not been impressed by what we have seen.

Looking at the expenses issue in the round, we have been less concerned about what MPs cost us than the more important issue of whether they deliver value for money. This article adds to the growing body of evidence that far too many MPs not only cost us a great deal but deliver very little indeed.

Speaking to a Whitehall insider yesterday, we shared the view that this affair now represents a major crisis for the political classes. But as some MPs still seek to defend their behaviour, and the apologists kick in, it is not at all clear that they have begun to understand the depth of loathing within the broader population.

The time has come and gone for a leisurely "review" of the issue, or some tweaking around the margins. Even a root and branch reform of the system is unlikely to restore confidence in what has become a tarnished occupation. Something more dramatic is required.

However, it is difficult to see what that could be. Fixing the expenses issue is, on the face of it, fairly straightforward, but convincing us that MPs are doing the jobs for which they are paid is an altogether different proposition. Years of sloth and neglect cannot be remedied overnight.

I rather suspect that the MPs have got into a mess from which they cannot extract themselves, in which case the only real question is what price they should be made to pay.

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