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Chart of the day: Business as usual in the ECB









The European Central Bank, surprising very few people, has announced that it is to keep the interest rates for the eurozone unchanged at 1 per cent. Mario Draghi, the president of the bank, warned last week that it could not "fill the vacuum" created by politicians' inactivity. Slate's Matt Yglesias interprets the warning in a somewhat more negative light, writing:

Central bankers would like you to believe that their job is really complicated and difficult, but done properly it's very simple. If the outlook for growth is worsening and global commodity prices are tumbling, you need easier money. If there's no economic slack and additional demand is just turning into a higher price level, you need tighter money. It's quite clear which situation Europe is in, so the job is to ease monetary conditions. 

Instead the ECB seems to have decided that its job is to play nanny to a few dozen querrelsome electoral democracies and dole out appropriate monetary conditions as a kind of reward for good behavior: "Implement the labor market and budget reforms we favor and we'll give you a happy meal."

Even during the worst parts of the recession, the ECB never cut the main interest rate for the eurozone below 1 per cent. The Financial Times adds:

So far the ECB has forecast a stabilising of economic activity in the eurozone at low levels. But its expectations of a gradual economic recovery this year have been challenged by recent data.

Eurozone purchasing managers’ indices showed activity contracting sharply at the start of the second quarter, while unemployment in the currency bloc reached a euro-era high of 11 per cent of the workforce in April. M3, the broad money supply measure, watched by the ECB as an inflation and activity indicator, also decelerated. As the council met, Germany reported the country’s industrial production had fallen by 2.2 per cent in April compared with the previous month.

Further strengthening the case for an interest rate cut have been signs that eurozone inflation is decelerating significantly – even if, at 2.4 per cent in May, it remained above the ECB’s target of an annual rate "below but close" to 2 per cent.


Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Lord Geoffrey Howe dies, age 88

Howe was Margaret Thatcher's longest serving Cabinet minister – and the man credited with precipitating her downfall.

The former Conservative chancellor Lord Howe, a key figure in the Thatcher government, has died of a suspected heart attack, his family has said. He was 88.

Geoffrey Howe was the longest-serving member of Margaret Thatcher's Cabinet, playing a key role in both her government and her downfall. Born in Port Talbot in 1926, he began his career as a lawyer, and was first elected to parliament in 1964, but lost his seat just 18 months later.

Returning as MP for Reigate in the Conservative election victory of 1970, he served in the government of Edward Heath, first as Solicitor General for England & Wales, then as a Minister of State for Trade. When Margaret Thatcher became opposition leader in 1975, she named Howe as her shadow chancellor.

He retained this brief when the party returned to government in 1979. In the controversial budget of 1981, he outlined a radical monetarist programme, abandoning then-mainstream economic thinking by attempting to rapidly tackle the deficit at a time of recession and unemployment. Following the 1983 election, he was appointed as foreign secretary, in which post he negotiated the return of Hong Kong to China.

In 1989, Thatcher demoted Howe to the position of leader of the house and deputy prime minister. And on 1 November 1990, following disagreements over Britain's relationship with Europe, he resigned from the Cabinet altogether. 

Twelve days later, in a powerful speech explaining his resignation, he attacked the prime minister's attitude to Brussels, and called on his former colleagues to "consider their own response to the tragic conflict of loyalties with which I have myself wrestled for perhaps too long".

Labour Chancellor Denis Healey once described an attack from Howe as "like being savaged by a dead sheep" - but his resignation speech is widely credited for triggering the process that led to Thatcher's downfall. Nine days later, her premiership was over.

Howe retired from the Commons in 1992, and was made a life peer as Baron Howe of Aberavon. He later said that his resignation speech "was not intended as a challenge, it was intended as a way of summarising the importance of Europe". 

Nonetheless, he added: "I am sure that, without [Thatcher's] resignation, we would not have won the 1992 election... If there had been a Labour government from 1992 onwards, New Labour would never have been born."

Jonn Elledge is the editor of the New Statesman's sister site CityMetric. He is on Twitter, far too much, as @JonnElledge.