Disorder abroad, opportunism at home -- the euro crisis keeps getting worse

Balls' hostile position on UK money going towards an IMF bailout is clearly aimed at destabilising t

So it looks as if the G20 has failed to agree concrete, immediate measures to prop up struggling eurozone economies. President Sarkozy has said the details of a collective boost to IMF resources will be discussed at a finance ministers' meeting in February. Yes, February. In other words, those leaders gathered in Cannes who don't front eurozone governments are not mobilising (or indeed reaching into their pockets) today to stop bond market pressure on Greece and Italy.

It is officially branded a eurozone-only problem. In fact David Cameron has said it in exactly those terms: 

The primary responsibility of sorting out the problems of the eurozone lies with eurozone countries themselves.

What this means more specifically is that a heavy burden now falls on the European Central Bank where short-to-medium term market intervention is concerned. Meanwhile, France and Germany must now really get to grips with the medium-to-long term questions of political will, institutional structures, treaty changes and general revision of the EU project to make the single currency work.

There is no money left in Europe and no-one wants to lend anymore. I'd say we are getting pretty close to a "game over" moment for Greece in the eurozone.

But would a process to ease Greece out of the single currency make contagion to Italy more or less likely? Would a Greek exit suggest that eurozone discipline is real -- i.e. if you can't cut it in the club, you're out -- and thereby reassure markets that the crisis is being dealt with in a rigorous fashion, or would it just suggest that the whole thing is unravelling chaotically and lead to another panicky flight from all southern European debt? The latter seems more probable (but then I am neither an economist nor a bond trader.)

From a domestic point of view, Cameron is spared an immediate battle with his party over Britain's contribution to the IMF. That is a small consolation though, as the general lack of commitment to a consolidated global euro rescue means continued instability and insecurity and, by extension, a weaker economic outlook.

Meanwhile, on that IMF point, an aside on Labour's role (bearing in mind that the UK opposition party's position is on the margin of the real conversation): Ed Balls has come out with a pretty hostile position regarding UK money going towards a euro bailout via the IMF. The argument -- made also, it must be said, by most Tories -- is that the Fund is meant to administer loans and set technical conditions for reform to nations only (something along those lines is planned for Italy). It is emphatically not meant to be absorbed into some wider European single-currency political rescue machine. The problem is, of course, that it is very hard to ringfence UK money once it has been paid to the IMF, so any decision to contribute more can -- as I argued yesterday -- look like participation in a euro bailout. That is certainly how Tory eurosceptics will present it.

I have a suspicion Balls was less pernickety about the IMF's constitutional obligations when Gordon Brown was corralling the G20 into a global economic rescue package. No doubt he has found it easier to arrive at his current position knowing it paves the way for a parliamentary alliance against the government, should there be a vote on increasing the UK's IMF contributions.

The last time that happened, Labour sided with the sceptics but the Tory rebellion wasn't big enough and the opposition whips not firm enough to get sufficient MPs through the lobby to defeat the government.

Feelings would certainly be stronger and turnout higher in a repeat fixture. The idea of Labour abetting Tory eurosceptics represents a victory of sorts for the shadow Treasury team over the shadow Foreign Office team. Douglas Alexander has generally been of the view that Labour should be playing the part of would-be responsible global citizens, exposing Tory recklessness. As one person familiar with Alexander's thinking on the matter put it to me recently: "it isn't as if Labour's problem is not being opportunistic enough."

Ed Balls clearly thinks the opportunity to destabilise the coalition with a parliamentary defeat is too good to waste.

Rafael Behr is political columnist at the Guardian and former political editor of the New Statesman

Getty
Show Hide image

When is the Budget 2017?

Chancellor Philip Hammond will present the last ever springtime Budget to Parliament on March 8th. He has a tricky hand to play.

Fans of the Chancellor’s red box photocall outside 11 Downing Street are in for a treat this year - the abolition of the Autumn Statement means Philip Hammond will present not one but two Budgets to the Commons.

The first – the last ever Spring budget – will be published on Wednesday 8 March 2017. A second – the first Autumn Budget – will come later in the year. This will be followed by a new Spring Statement, which will respond to forecasts from the Office for Budget Responsibility but will no longer introduce new tax and spend changes. 

But what is likely to happen this time around? The Institute for Fiscal Studies set out a grim outlook for the chancellor in its "Green Budget" earlier this month. This year’s deficit will be higher than in 47 of the 60 years before the crash of 2008, the national debt is at its highest level since 1966, and the chancellor is still committed to the diet of austerity prescribed by his predecessor, George Osborne. With day-to-day spending on public services set for a real-term fall of 4 per cent between now and 2020 and those same public services already in a parlous state, Hammond has a difficult hand to play. 

However, Theresa May’s government has proved adept at U-turning when it needs to – think the Brexit White Paper and Amber Rudd’s lists of foreign workers. Here's what to look out for:

Changes to business rates

MPs of all stripes have been pressuring the government to rethink its plans on business rates, which will see new rates based on updated property valuations introduced for the new financial year. 

Initially, the government maintained that three-quarters of businesses won’t see any changes to their rates at all. But the fact that rates for pubs, shops, GP surgeries hospitals could be set to more than double riled Tory backbenchers, several ministers, the CBI and right-wing papers including the Sun and Daily Mail

We will likely see a concession from the Treasury on controversial changes, which were slated to kick in from April. Communities and Local Government secretary Sajid Javid told the Commons that a solution would be in place by Budget Day. 

Reassurances for social care

Britain’s crisis-stricken social care system – and the vexed question of how we’re going to pay for our ageing population – also looms large. In the aftermath of the controversy around the government’s supposed “sweetheart deal” with Surrey County Council, local authorities and charities have been lobbying Number 10 for a new settlement – or at least some extra cash to ease the pain. 

Indeed, the Health Service Journal has revealed the Care Quality Commission is to be handed regulatory oversight for how councils manage their social care services, and a number MPs are increasingly convinced that the government could be set to unveil a modest increase in funding. Any such package would only be a sticking plaster.