Operation Target Ed Balls

The key question is why these documents were leaked now.

If, to borrow Harold Wilson's dictum, a week is a long time in politics, it's not hard to see why some in Labour are dismissing today's Telegraph splash ("Ed Balls's 'brutal' plot to overthrow Tony Blair") as "ancient history". But the story deserves more scrutiny than that.The paper has obtained a cache of 36 leaked documents outlining how Ed Balls and Ed Miliband fought to get Gordon Brown into Number 10 within weeks of the 2005 general election. The private papers, which belong to Balls, contain no single, startling revelation and will be of interest to few other than Westminster Kremlinologists. But there is no doubt that they are damaging to the shadow chancellor. They contradict his public insistence that he never sought to undermine Blair (just a year ago he dismissed claims that he was disloyal to the former PM as "balderdash") and will hinder his attempts to detoxify his brand.

Then there's the question of why, six years on, these documents have come to light now. Balls says he last saw the papers in a file on his desk at the education department shortly before the 2010 election. The shadow chancellor is not a man short of enemies in either Labour or the Conservative Party and the documents are almost certain to have been leaked by a political opponent. Sir Gus O'Donnell, the cabinet secretary, has already sanctioned an investigation into the loss of the papers. At a time when the government's economic strategy is under increasingy scrutiny, partly thanks to Balls's efforts as shadow chancellor, the leak is highly convenient, to say the least.

In devoting so much attention to this story the Telegraph is aiming to use Balls and Miliband's past to damage their present. Whether it will succeed is another matter. The documents might fascinate the Westminster village but they will be of little concern to the public, most of whom long ago lost interest in the TB-GB psychodrama. The Damian McBride scandal inflicted considerable damage on Labour's poll rating but other revelations, such as those of Gordon Brown's "bullying", failed to do so. The Tories, however, who pointedly refer to Balls as a "man with a past" will still welcome these papers as political gold.

George Eaton is political editor of the New Statesman.

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Leader: The unresolved Eurozone crisis

The continent that once aspired to be a rival superpower to the US is now a byword for decline, and ethnic nationalism and right-wing populism are thriving.

The eurozone crisis was never resolved. It was merely conveniently forgotten. The vote for Brexit, the terrible war in Syria and Donald Trump’s election as US president all distracted from the single currency’s woes. Yet its contradictions endure, a permanent threat to continental European stability and the future cohesion of the European Union.

The resignation of the Italian prime minister Matteo Renzi, following defeat in a constitutional referendum on 4 December, was the moment at which some believed that Europe would be overwhelmed. Among the champions of the No campaign were the anti-euro Five Star Movement (which has led in some recent opinion polls) and the separatist Lega Nord. Opponents of the EU, such as Nigel Farage, hailed the result as a rejection of the single currency.

An Italian exit, if not unthinkable, is far from inevitable, however. The No campaign comprised not only Eurosceptics but pro-Europeans such as the former prime minister Mario Monti and members of Mr Renzi’s liberal-centrist Democratic Party. Few voters treated the referendum as a judgement on the monetary union.

To achieve withdrawal from the euro, the populist Five Star Movement would need first to form a government (no easy task under Italy’s complex multiparty system), then amend the constitution to allow a public vote on Italy’s membership of the currency. Opinion polls continue to show a majority opposed to the return of the lira.

But Europe faces far more immediate dangers. Italy’s fragile banking system has been imperilled by the referendum result and the accompanying fall in investor confidence. In the absence of state aid, the Banca Monte dei Paschi di Siena, the world’s oldest bank, could soon face ruin. Italy’s national debt stands at 132 per cent of GDP, severely limiting its firepower, and its financial sector has amassed $360bn of bad loans. The risk is of a new financial crisis that spreads across the eurozone.

EU leaders’ record to date does not encourage optimism. Seven years after the Greek crisis began, the German government is continuing to advocate the failed path of austerity. On 4 December, Germany’s finance minister, Wolfgang Schäuble, declared that Greece must choose between unpopular “structural reforms” (a euphemism for austerity) or withdrawal from the euro. He insisted that debt relief “would not help” the immiserated country.

Yet the argument that austerity is unsustainable is now heard far beyond the Syriza government. The International Monetary Fund is among those that have demanded “unconditional” debt relief. Under the current bailout terms, Greece’s interest payments on its debt (roughly €330bn) will continually rise, consuming 60 per cent of its budget by 2060. The IMF has rightly proposed an extended repayment period and a fixed interest rate of 1.5 per cent. Faced with German intransigence, it is refusing to provide further funding.

Ever since the European Central Bank president, Mario Draghi, declared in 2012 that he was prepared to do “whatever it takes” to preserve the single currency, EU member states have relied on monetary policy to contain the crisis. This complacent approach could unravel. From the euro’s inception, economists have warned of the dangers of a monetary union that is unmatched by fiscal and political union. The UK, partly for these reasons, wisely rejected membership, but other states have been condemned to stagnation. As Felix Martin writes on page 15, “Italy today is worse off than it was not just in 2007, but in 1997. National output per head has stagnated for 20 years – an astonishing . . . statistic.”

Germany’s refusal to support demand (having benefited from a fixed exchange rate) undermined the principles of European solidarity and shared prosperity. German unemployment has fallen to 4.1 per cent, the lowest level since 1981, but joblessness is at 23.4 per cent in Greece, 19 per cent in Spain and 11.6 per cent in Italy. The youngest have suffered most. Youth unemployment is 46.5 per cent in Greece, 42.6 per cent in Spain and 36.4 per cent in Italy. No social model should tolerate such waste.

“If the euro fails, then Europe fails,” the German chancellor, Angela Merkel, has often asserted. Yet it does not follow that Europe will succeed if the euro survives. The continent that once aspired to be a rival superpower to the US is now a byword for decline, and ethnic nationalism and right-wing populism are thriving. In these circumstances, the surprise has been not voters’ intemperance, but their patience.

This article first appeared in the 08 December 2016 issue of the New Statesman, Brexit to Trump