Economy
The turmoil sparked condemnation in the US, bitter memories in Greece and interest among tourists in Singapore
Tuesday 27 September 2022 16.13 BST
The international reaction to the turmoil in financial markets that saw the pound fall to its lowest level against the dollar is devastating in its condemnation of the new government’s policies, with shock and shock particularly focused on the will of the chancellor to experiment with one of the most stable economies in the world.
In the US, criticism was led by former US Treasury Secretary Larry Summers, who took to Twitter to attack what he called “totally irresponsible UK policy”, while expressing surprise that markets they had reacted so quickly and harshly. He said that this in itself indicated a loss of credibility.
I was very pessimistic about the consequences of totally irresponsible UK politics on Friday. But, I didn’t expect the markets to go so bad so quickly.
A strong tendency for long rates to rise as the currency falls is a hallmark of situations where credibility has been lost.
— Lawrence H. Summers (@LHSummers) September 27, 2022
His long thread concluded with the dark prediction that the financial crisis in Britain would not only affect “London’s viability as a world financial centre” but “could have global consequences”.
In the New Yorker, John Cassidy wrote that the crisis was all the more disturbing for Britain because it came so soon after the death of Queen Elizabeth II, “its last remaining link to a time when the maps of their school books showed vast expanses of the earth’s surface in imperial red.” Now, he said, “they face a humiliating currency crisis.”
He said the prime minister, Liz Truss, and her chancellor, Kwasi Kwarteng, had plunged Britain into a “good economic mess”.
“The tragedy,” said Cassidy, “is that all of this is unnecessary. Although Britain has been through many tribulations in recent years, it is the sixth largest economy in the world, has a stable political system and London is a of the world’s largest financial centers. If their government were even reasonably competent, the risk of a financial explosion would be minimal. Unfortunately, this basic civic requirement is not being met.”
In Ireland, commentators said the “British explosion” had clearly backfired and urged the Irish government, which is due to present its own budget on Tuesday, to heed the lesson. “Ministers Paschal Donohoe and Michael McGrath have been given a real-time exposure on exactly how not to do this,” the Irish Independent said in an editorial. “Despite the considerable weight of expectations, the 2023 Budget must be grounded.”
Extra spending and tax measures to prevent price rises are expected to cost Irish households and businesses around €11bn (£10bn), but unlike its neighbour, Dublin has a tax surplus .
The Irish Times said that, learning from London’s experience, “the message sent by the Budget must be one of stability and that it involves a credible plan for the public finances. There should be sufficient resources to respond to the immediate crisis and leave room to adapt to circumstances next year if necessary.
In Germany, Frankfurter Allgemeine Zeitung’s London-based economic correspondent Philip Plickert told readers that “as a financial and economic historian, Kwarteng should consult the history books once again to see how dangerous he can be a growing twin deficit. Prime Minister Truss cannot afford a balance of payments crisis.”
Meanwhile, Germany’s finance minister, Christian Lindner, told the same newspaper at an event he hosted on Monday evening that he would wait to learn the lessons of what he called the “big experiment” Britain had embarked on , he said, “putting the foot on the gas while the central bank slows down”.
The Munich-based Süddeutsche Zeitung called the new policy a “reckless bet”.
“This malaise is more familiar in emerging markets, but not in a highly developed economy like Britain’s. After the end of Boris Johnson’s government, a change of economic course was expected, but so radical? Liz Truss has said goodbye to a single stroke of one of the keystones of Tory politics: he doesn’t care about the finances of the solid state.”
Ulrik Harald Bie, writing for Denmark’s Berlingske, called the market reaction “swift punishment for a failed policy.”
In Greece, the sterling crisis has evoked memories of the 2010 financial emergency, when rising borrowing costs raised the specter of a Greek economic collapse as a lack of confidence in the economy
Government insiders told the Guardian that the tax cuts outlined by the British chancellor were not only “foolish” but reminiscent of the populist policies pursued by Syriza, the hard-left who voted him into office at the point peak of the crisis.
“They don’t make sense either politically or economically,” said one well-placed official who expressed disbelief that Kwarteng had decided to ignore the budget forecasts. “It is as if there is an element of the populism, unpredictability and unprofessionalism that we saw in Syriza over the Liz Truss government.”
Greece was close to default and expulsion from the euro zone. But as in those roller-coaster days, and with the UK general election more than two years away, Greek analysts said it would be difficult to predict what the outcome would be. “Labour is clearly on course for a landslide,” said the official, speaking on condition of anonymity because he did not want to speak impolitely of a government in a country with which Greece traditionally has such strong ties . “But if there are two more years of this Britain will have to go through a bungee jump, there will be roller-coaster days before it arrives.”
In France, the pound’s run was one of the top stories in the economic papers, with broadcaster France 24 referring to the Truss government’s mini-budget as “a game to kill the stock market”, while the daily La Croix wrote: “The unfunded expense.” by Liz Truss brings the pound down…the jewel in the crown, the British pound, has lost its luster.”
Le Point magazine accused Truss of “losing control of the economy” and giving way to a Labor government, while financial website Capital speculated: “How long? [will] the fall, which has been vertiginous in recent days, continues?”
In much of Africa, UK government and pound issues have been relegated to specialist websites and business pages, although in South Africa the South African Broadcasting Corporation led its daily market update with the news of the fall of the pound.
However, there was positive coverage of the UK’s outlook, with one Nigerian newspaper saying it remained a destination for would-be migrants. Vanguard called the UK “a friendly and safe place to live”, due to its ban on allowing citizens to arm themselves, which was “strictly enforced by its occupants” and a “very stable economy “.
Kwarteng’s tax cuts will force the Bank of England to raise interest rates “significantly”.
From a Southeast Asian perspective, the crisis could be seen as a positive by those who want to go on holiday, shop, buy property or pay student fees in the UK, Singapore’s Straits Times wrote. Now could be a good time to visit the UK, the newspaper said, citing travel agency EU Holidays, which said it had seen inquiries about UK holidays rise by almost a third.
“It’s the best time for people to go on holiday to the UK because this is the cheapest rate ever – I’ve never seen the rate drop this much before,” said Mohamed Rafeeq, owner of Clifford Gems and Money Exchange in Raffles City. shopping centre.
The fall in the value of the pound is also likely to be welcome news for many international students whose tuition fees are due at this time of year.
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