After Labour's leftwards lurch, the Lib Dems have the centre all to themselves

With Labour preaching socialism and the Tories chasing after UKIP, Clegg will be rather pleased with how things have turned out.

Apparently we in the Lib Dems are meant to have had a fit of the vapours over the re-emergence of Red Ed. James Forsyth tells us that "there’s genuine concern in Clegg’s circle about the contents and policy implications of Miliband’s speech. After yesterday, it is even harder to see how a Clegg Miliband coalition would work."

And I’m sure he’s not making that up. I suspect Nick does go a little weak at the knees at the thought of being the filling in an Ed Miliband and Linda Jack sandwich.

But actually Nick will probably be rather pleased about the way things have panned out in Brighton. Sure, the inner circle may be a little horrified at the prospect of coalition negotiations with a Labour leader reviving the 1983 manifesto, but at least Labour have now clearly tacked left. They may not have meant to – 'One Nation' is still being kicked about - but in the context of Labour’s new strategic approach, it’s a dead duck. They have nailed their colours firmly to the socialist mast.

Meanwhile, far from being tempted to chase after them, the Tories seem destined to tack in the other direction as they look to take the ground back from UKIP. How else to explain George Osborne's decision to march off to Brussels to defend capitalist predators just as Miliband is taking them on. 'Ed’s trying to fix the market, George is trying to free it' will be their cry around the shires.

And where does that leave Nick? Well, firstly, in the centre ground that he has promised to fight for since the last election. And what’s more, he finds the Lib Dems now have it all to themselves.

Secondly, Labour knows full well that to retain 2010 Lib Dem voters, it needs Lib Dem-friendly policies – like a mansion tax, a living wage, free childcare, decarbonisation targets. Why, Lib Dem activists even voted to condemn the Bedroom Tax last week. Plenty of common ground there for any coalition negotiations.

And thirdly, if either Labour or the Tories genuinely want to deliver on any of their more radical and eye-catching policies, they’re going to have to come up with some significant quid pro quos for the Lib Dems – like Lords reform. Otherwise they may find they can’t deliver on some high profile pledges, which, from experience, doesn’t play well with the average voter.

So it’s all fallen into place rather nicely. Almost like it was planned that way. It’s probably why they call him Mystic Clegg.

Richard Morris blogs at A View From Ham Common, which was named Best New Blog at the 2011 Lib Dem Conference

Nick Clegg speaks at the Liberal Democrat conference in Glasgow earlier this month. Photograph: Getty Images.

Richard Morris blogs at A View From Ham Common, which was named Best New Blog at the 2011 Lib Dem Conference

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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