Why the Tories shouldn't get excited about "good" economic news

The economy might appear to be improving but forecasters predict a "triple-dip recession" and rising unemployment.

This week's economic news has prompted hope among the Tories that the tide is finally turning in their favour. Employment is at a record high, inflation is down to 2.2 per cent, its lowest level since November 2009, and borrowing has fallen to its lowest level for four years. The positive trend will continue next week when the Office for National Statistics (ONS) announces that the economy finally returned to growth in the third quarter (the National Institute of Economic and Social Research, for instance, has predicted growth of 0.8 per cent). Team Osborne hope that all of this will allow them to tell a plausible story of recovery.

However, it's worth pointing out several inconvenient truths. First, the next set of growth figures will be artificially inflated by the bounce back from the extra bank holiday in the previous quarter (which reduced growth by an estimated 0.5 per cent) and by the inclusion of the Olympic ticket sales (which are expected to add around 0.2 per cent to GDP). So, if the ONS announces that the economy grew by 0.8 per cent in the third quarter, the underlying rate of growth will be just 0.1 per cent.

Worse, many expect the economy to contract in the fourth quarter (what our economics editor David Blanchflower has termed a "triple-dip recession"). Bank of England MPC member Martin Weale has warned: "The Jubilee depressed output in the second quarter so you get an automatic bounce back. But if we talk about underlying growth then I think the economy is flat. I certainly would not say there is no risk of [a triple-dip recession] happening." Martin Beck, UK economist at Capital Economics, told the Today programme last week: "we expect the economy to start contracting again in the fourth quarter."

On employment, the picture is similarly mixed. As I noted when the most recent figures were published on Wednesday, 59 per cent of the 212,000 jobs created in the last quarter are part-time and nearly half (101,000) are in London, suggesting that the labour market benefited from a temporary Olympics effect. Adequately paid, full-time employment is still remarkably hard to come by. Of the new jobs created over the last three months, one in three offer fewer than 15 hours week a work, while 54 per cent offer fewer than 30 hours. A near-record 1.4 million people are working part-time because they can't find full-time jobs. It's also worth noting that most forecasters expect unemployment to rise significantly next year as further spending cuts, a lack of growth and rising productivity restrict job creation. The CBI, for instance, predicts that unemployment will increase by nearly 200,000 to 2.7m.

Finally, the deficit. While September's figures were better-than-expected, borrowing so far this year remains £2.7bn (4.2 per cent) higher than in the same period last year and George Osborne is still expected to miss his annual target by £5-10bn. The Chancellor aims to borrow no more than £121bn this year, but in the first six months of 2012 he's borrowed £65.1bn. As a result, when he delivers his autumn statement on 5 December, Osborne will likely be forced to postpone his goal of eliminating the structural deficit (originally scheduled for 2015) for a third year - to 2018. Having once hoped to offer significant cuts in taxation at the next election, the Tories will only be able to promise yet more austerity.

Chancellor George Osborne speaks at the Conservative conference in Manchester earlier this month. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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“We don’t BeLiviu”: how Romania is rising against corruption

Night after night, activists gather in Victory Square to demand the resignation of the government.

For much of the year, the large tarmac square in front of the main government building in Bucharest is little more than a glorified roundabout, busy with traffic and surrounded by towering, communist-era blocks on one side and a wedge-shaped park on the other.

But when Romanians gather to protest, as they have done these past weeks in record numbers, it becomes a place of pent-up frustration; against the ruling class, the direction in which the country is heading and the way many politicians continue to use the public purse as a source of cash for their personal use. This was not how it was supposed to be, ten years after the country joined the European Union.

On 31 January Romania’s new government, in power for less than a month, sneaked in a piece of emergency legislation during a late-night session to weaken the punishment for abuse of power, negligence while in office and conflict of interest. In effect, the move decriminalised some forms of corruption, if the financial damage caused amounted to less than roughly £38,000.

Many Romanians and international observers saw it as a brazen attempt to help politicians facing legal problems, prominent among them Liviu Dragnea, the leader of Romania’s largest political party, the Social Democrats, and the president of the Chamber of Deputies (Romania’s House of Commons). Dragnea is facing trial for supposedly getting colleagues added to the public payroll even though they do not work for the state. He is one of many public officials facing a day in court; in fact, he has already faced the courts, earning a 2015 conviction for electoral fraud that barred him from becoming prime minister despite his party’s strong showing in parliamentary elections last December.

The backlash against the ordinance was swift, as night after night tens of thousands, even hundreds of thousands, and, once, half a million took to the streets to protest. On 5 February, between 500,000 and 600,000 people protested across Romania, with 300,000 in the government square alone. Demonstrations have also taken place in 50 towns and cities in the country, as well as in the Romanian diaspora.

The government backed down on its immediate plans and repealed the decree, but trust was by then long gone. Protests are now in their third week and, despite snowfall, show little sign of ending.

“This government needs to go. You can’t be elected in December and have hundreds of thousands on the streets in a month,” said Dorial Ilie, a 33-year-old PR worker, one cold evening in the square.

Romanians are fed up with corruption. The country sits 57th in Transparency International’s corruption perceptions index – up from 69th place in 2014, but corruption remains endemic, and Romania is near the bottom of the list when it comes to EU countries.

Despite the efforts of the country’s much-admired National Anti-corruption Directorate (DNA), set up in 2003 and responsible for the successful prosecution of thousands of politicians, civil servants, judges and business leaders, there is a sense that the rich and powerful still operate as if they were above the law. This was certainly not helped by the attempts to change the anti-corruption legislation.

“They had been planning to do this for years,” said Dan Popescu, a 46-year-old priest protesting in the square, echoing the sentiments of many of those around him.

The demonstrations, the largest in the country since the fall of Nicolae Ceausescu in 1989, have been an impressive display of people power in a country that is increasingly using the streets as a communication platform. Large-scale protests in Romania also brought down the last elected government in November 2015, after corruption was blamed for a fire in a Bucharest nightclub that left 64 dead, and before that, mass protests during the 2014 presidential election, this time over mismanagement of diaspora voting, arguably helped tip the balance in favour of the now-incumbent, Klaus Iohannis.

Protesters are hoping for a similar impact this time around, although, having survived a no-confidence vote in parliament on 8 February, the new government shows little willingness to depart.

At the same time, most of those gathering night after night in Victory Square – as the drab square outside the government building is officially known – are still loudly demanding the resignation of the government, but would probably settle for the resignations of Dragnea and the prime minister, Sorin Grindeanu.

After so many nights standing out in the cold, protesters have become very creative. Elaborate banners filled with puns (“We don’t BeLiviu”) have appeared, as have messages written with lasers and projected on to nearby buildings. Some have shone the Batman symbol on to the roof of a nearby museum, a funny (or perhaps desperate) plea for help. The national anthem is often sung. On Sunday, a sea of protesters held up pieces of paper coloured over their phone lights to create a vast Romanian flag.

Despite these touches of humour and inventiveness, there is a steely determination evident and it has only grown since the first night or two.

On 13 February the national parliament approved a referendum related to the fight against corruption, as proposed by the protest-supporting president. But most of those on the streets these past weeks would argue that they have already given their opinion on the matter.

Many Romanians are increasingly frustrated that they have to head out to protest time and again in order to hold their elected officials to account. Few believe that the present political class can change. “They’ll try again, in another way. Maybe in parliament, where they have a majority,” said Ioana David, an administrative worker for a construction company.

Even so, she – like so many others – is likely to continue to go out into Victory Square in the days and perhaps weeks ahead, in order to make sure her voice gets heard.

This article first appeared in the 16 February 2017 issue of the New Statesman, The New Times