Morning Call: pick of the papers

The ten must-read pieces from this morning's newspapers.

1. David Cameron needs to understand the state before he can cut the deficit (Guardian)

Cameron is right: Britain's deficit must be tackled. But his failure to fully comprehend the public sector could prove costly, warns Simon Jenkins.

2. Britain should be defending European justice, not attacking it (Independent)

It is unfortunate that the issue of prisoners' votes has been used as a springboard for attack, writes Nicolas Bratza.

3. Enough tinkering. Only a revolution will do (Times) (£)

Remodelling global capitalism is the big idea of 2012. But, asks Anatole Kaletsky, is the world brave enough to make the changes needed?

4. It's not too late to save the NHS from the barbarians (Guardian)

To the Tories, health is a huge untapped business opportunity - but the backlash could still derail their privatisation bill, says Seumas Milne.

5. A blueprint for Germany to save the eurozone (Financial Times)

Robert Zoellick believes that Berlin should issue a revival plan for Europe.

6. Armenian questions (Daily Telegraph)

According to this leading article, Turkey is being over-sensitive about France's Armenian genocide ruling.

7. State of the union: President Obama addresses inequality (Guardian)

The president can thank Occupy for making his new economic populism possible. Gary Younge asks: will it be enough, come November?

8. We've been here before - and it suits Israel that we never forget 'Nuclear Iran' (Independent)

The Ayatollah ordered the entire nuclear project to be closed down because it was the work of the devil, Robert Fisk points out.

9. Memo to Mitt (Financial Times)

Lloyd Green suggests how Romney could defeat Newt and win the White House.

10. William Barnes - England's Rabbie Burns (Guardian)

As Scotland celebrates Rabbie Burns we should remember England's own poet with a cause, writes Paul Kingsnorth.

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Why relations between Theresa May and Philip Hammond became tense so quickly

The political imperative of controlling immigration is clashing with the economic imperative of maintaining growth. 

There is no relationship in government more important than that between the prime minister and the chancellor. When Theresa May entered No.10, she chose Philip Hammond, a dependable technocrat and long-standing ally who she had known since Oxford University. 

But relations between the pair have proved far tenser than anticipated. On Wednesday, Hammond suggested that students could be excluded from the net migration target. "We are having conversations within government about the most appropriate way to record and address net migration," he told the Treasury select committee. The Chancellor, in common with many others, has long regarded the inclusion of students as an obstacle to growth. 

The following day Hammond was publicly rebuked by No.10. "Our position on who is included in the figures has not changed, and we are categorically not reviewing whether or not students are included," a spokesman said (as I reported in advance, May believes that the public would see this move as "a fix"). 

This is not the only clash in May's first 100 days. Hammond was aggrieved by the Prime Minister's criticisms of loose monetary policy (which forced No.10 to state that it "respects the independence of the Bank of England") and is resisting tougher controls on foreign takeovers. The Chancellor has also struck a more sceptical tone on the UK's economic prospects. "It is clear to me that the British people did not vote on June 23 to become poorer," he declared in his conference speech, a signal that national prosperity must come before control of immigration. 

May and Hammond's relationship was never going to match the remarkable bond between David Cameron and George Osborne. But should relations worsen it risks becoming closer to that beween Gordon Brown and Alistair Darling. Like Hammond, Darling entered the Treasury as a calm technocrat and an ally of the PM. But the extraordinary circumstances of the financial crisis transformed him into a far more assertive figure.

In times of turmoil, there is an inevitable clash between political and economic priorities. As prime minister, Brown resisted talk of cuts for fear of the electoral consequences. But as chancellor, Darling was more concerned with the bottom line (backing a rise in VAT). By analogy, May is focused on the political imperative of controlling immigration, while Hammond is focused on the economic imperative of maintaining growth. If their relationship is to endure far tougher times they will soon need to find a middle way. 

George Eaton is political editor of the New Statesman.