Sadiq Khan speaks at the Labour conference in Manchester in 2012. Photograph: Getty Images.
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London mayoral race: Sadiq Khan "to focus all his effort" on general election

Shadow London minister will not follow David Lammy in launching mayoral bid before the election. 

David Lammy's decision to formally launch his bid to become London mayor (as tipped in my column last month), making him the first Labour MP to do so, has prompted commentators to ask whether his likely rivals, Sadiq Khan, Tessa Jowell and Diane Abbott, will follow his lead. 

In response, a source close to Khan told me: 

Sadiq is working his socks off to get Ed Miliband elected Prime Minister. He will continue to focus all his effort on winning 12 extra seats in London as shadow London minister and articulating Labour's radical alternative to the government's prison crisis as shadow justice secretary. 

As shadow London minister, Khan of course enjoys the advantage of being able to woo the Labour selectorate and to win credit for what will likely be a strong general election peformance (Labour's local election results in the capital were its best since 1998).

Last year, after withdrawing from a Progress debate on the future of London, which featured Lammy, Jowell, Andrew Adonis and Abbott (making it the first hustings in all but name), he told me: "I was told it was going to be a forum to discuss ideas about London and it was quite clear to me that it was actually turned into a beauty parade. I’ve got no interest in being involved in a beauty parade, or playing ego politics. It’s about me making sure that I do the job I’ve been given as shadow minister for London with the seriousness it deserves. I’m a member of team Labour."

Jowell, who has led in the early opinion polls, made no comment on Lammy's decision. Last month, in response to Boris Johnson's announcement that he would stand for parliament, she said: "There will be much speculation about candidates; Labour, Tory and other parties. I will certainly be taking this time to prepare my potential offer to Londoners, but this is not a time for formal decision or declaration.

"There are many uncertainties between now and 2016, and Labour in London must not be distracted from the crucial task of representing Londoners and winning in those marginal seats which will contribute to a Labour victory next year. A victory which will enormously improve Londoners’ lives by building homes, helping young people get the skills they need to get jobs, supporting London’s growing and divergent economy and acting to tackle the driving causes of the inequalities that continue to scar our city." 

Having previously warned that Labour "must not be distracted" from the general election, the former Olympics minister will now have to decide whether to revise her position in response to Lammy. Abbott, who has also publicly expressed interest in the role, has not yet replied to a request for comment. 

How she and others play it may well depend on how much momentum Lammy gains from his early entry. 

George Eaton is political editor of the New Statesman.

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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