Differentiation is necessary but not sufficient

There needs to be a fundamental political repositioning of the Lib Dems

One word that has been uttered time and again at this year's autumn Liberal Democrat conference is this: 'differentiation'. This is, in simple terms, the strategy that Liberal Democrats in government are now pursuing: highlighting much more openly the areas where the two coalition parties disagree. It's one of the reasons, incidentally, why this year's conference has been rather unexpectedly upbeat, because, for the first time in a while, there is a strategy in place to which both the party leadership and ordinary members subscribe.

But while differentiation - if done properly - is certainly necessary, it is by no means sufficient. After all, if disagreeing with the Conservatives was all we had to do for electoral success, the Liberal Democrats would have had parliamentary majorities since the party's formation.

Actually, what is now needed is something much more difficult than mere differentiation, tough though that in itself is to get right. What's needed is a deep and fundamental repositioning of the Liberal Democrats within British politics.

Such a process won't be easy, because it will involve accepting difficult truths - the most crucial of which is that many, if not most, of those who voted Liberal Democrat because they saw us as an uncompromised version of the Labour party will not be coming back to us any time soon. Many of them will go back to supporting a Labour party relishing the easy populism of opposition, while the ones that see any electoral compromise as a sin - the protest voters - will go and support smaller parties like the Greens.

Thankfully, though, the sort of strategising necessary to reposition the party seems already to be taking place. When I interviewed him on Sunday, Nick Clegg clearly had a vision about where he wants to take the party over the next few years, even if it is one that is not yet completely formed. He sums up how he wants the party to be seen quite pithily: more economically responsible than Labour and more socially just than the Conservatives.

This is an idea that has a lot of merit in my view, though it would be more effective if it wasn't expressed relative to the positions of the other parties. Developing the language necessary to clearly communicate this idea without borrowing the language of the other parties will take time, but fortunately that is something we have got.

Those political commentators who take a more intelligent approach to the Liberal Democrats are also beginning to see promise in the green shoots of this new strategy - take Mary Ann Sieghart in Monday's Independent, for example.

Much of the analysis of Nick Clegg's speech to conference today will focus on what he has to say about his coalition colleagues. What I will be listening out for, though, is not about what he says about the present, but hints about his vision for the future.

Nick Thornsby is a Liberal Democrat member and activist. His own blog can be found here.

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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