David Cameron and Ed Miliband walk through the Members' Lobby before the Queen's Speech at the State Opening of Parliament. Photograph: Getty Images.
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PMQs review: Miliband halts Cameron's advance on the economy

The Labour leader won a rare victory on the Tories' strongest territory. 

The fallout from the Autumn Statement and the focus on the cuts the Tories would make means that Labour is feeling better about its position on the economy than it has done for months. Voter anxiety about the threat to public services, they believe, could turn the election in their favour. In a sign of this new confidence, Ed Miliband led on the issue (on which the Conservatives have long held the advantage) at the final PMQs of the year. Noting that it was the Office for Budget Responsibility that first drew attention to the fact that public spending would fall to its lowest level since the 1930s under George Osborne's plans, he quipped: "Why does he believe the OBR has joined the BBC in a conspiracy against the Conservative Party?" Having been criticised in the past by Labour MPs for dropping messages too quickly, Miliband is determined to keep pushing the "1930s" line. 

Cameron replied that in real-terms public spending would merely fall to the same level as in 2002-03, but Miliband had a neat riposte: "He's spent four years saying we spent too much. Now he's saying we spent too little." The PM later turned to the deficit and the fact that Labour's plans would allow greater borrowing than the Conservatives'. But Ed Balls's pledge to cut the deficit every year and the Tories' promise of £7bn of unfunded tax cuts means that Miliband is better-armed than in the past. As well as creating a sense of risk around public services, Labour is now able to point to the danger of another VAT rise: something Cameron notably refused to rule out today. The PM was able to turn the leaked Labour strategy document on immigration to his advantage, highlighting its reference to the Conservatives' 17-point lead on managing the economy. But Miliband remained unruffled. The Labour leader never quite landed a knock-out blow. Yet given that the ecnomy is traditionally the Tories' strongest suit, and today's positive employment and earnings figures, Miliband will be content with a points victory. 

The two men's closing exchange neatly framed the battle to come: Miliband charged the Tories with a plan not for "balancing the books" but for "slashing the state". Cameron declared: "They can't talk about the deficit because it's fallen, they can't talk about growth because it's rising, they can't talk about jobs because we're increasing them." Miliband's aim is to persuade voters that the threat to public services is too great to award the Tories another term in government. Cameron's is to persuade them that the threat to growth and jobs is too great to gamble on an untested opposition. The election will likely turn on which scenario voters fear more. 

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