Thus spake the dear, old 'Duke of Boot' after the cataclysmic battle of Waterloo, and thus might speak 'Dim Dave' if, against the current odds, he squeaks in at the next election. His domestic problems, of course, are all over the media and need no repetition. However, it is the gathering storm which raises no warning dust which should concern him, not that there is a hell of a lot he can do about it. Roger Bootle in The Telegraph reminds us all, grimly, that absolutely nothing has been done to correct the massive faults within the euro system. The 'Kaiserin' insists that there must be no financial laxity and her government:
. . . is planning to run a balanced budget over the next several years even though the Maastricht Treaty would allow it to run a deficit of 3pc of GDP. German fiscal plans envisage its debt to GDP ratio falling sharply. So the German public finances will be in much better shape than just about anywhere else in the advanced world – including the UK.
As Bootle reminds us, the Germans believe the rest of Europe is in 'die Scheiße' precisely because they all failed to be Germanic enough. He also points out that a good deal of the past wealth created by German industry came from precisely those extravagant European countries who borrowed and spent like drunken sailors! Please note my use of the words "past wealth" because the last two quarters have seen a large drop in German productivity. The German 'miracle' is being tested, so let us hope their 'faith' is strong! Meanwhile all eyes are on France and Italy although Spain, with its internal Catelonian difficulties, should not be ignored. Italy in particular needs careful watching according to Bloomberg:
Italy’s 10-year yield rose two basis points to 2.41 percent, after increasing two basis points last week. The nation sold 5.5 billion euros of debt due in 2019 and 2024 and 2.9 billion euros of floating-rate notes maturing in 2020 today.
'Dim Dave' needs a European financial crisis inside the next eight months like a hole in the head because, of course, he will be blamed by the (less than) Great British Public! But it is perhaps the potential world crisis that should worry him (and you!) even more, as Jeremy Warner, er, warns in The Telegraph:
Contrary to widely held assumptions, the world has not yet begun to de-lever. In fact global debt-to-GDP – public and private non financial debt - is still growing, breaking new highs by the month.
There was a brief pause at the height of the crisis, but then the rise in the global debt-GDP ratio resumed, reaching nearly 220c of global GDP over the past year. Much of the more recent growth in this headline figure has been driven by China, which in response to the crisis, unleashed a massive expansion in credit.
In a 'normal' world too much debt would be worked off gradually with an increase in productivity and commerce but, alas, around the world today the brakes are coming on and growth is stagnating where it isn't actually falling. At some time it will dawn on the international 'Shylocks' that all those government bonds they bought - and for which they charged a fortune in interest - are not going to be repaid. At that point - brown stuff hits fan! And again,'Dave' must be hoping that the penny, or rather the ga-zillions, doesn't drop before next May!
