ECB president Mario Draghi finally gave the markets what they wanted yesterday, announcing his OMT programme of unlimited bond purchases in the secondary markets with the focus on short-term debt. “The Euro is irreversible,” Draghi is quoted as saying by the FT (£) which splashes on the story.
Markets reacted accordingly. Equity markets were up across the continent and in America with the benchmark S&P index up 1.6 per cent. The euro was sent to its highest level against the US dollar for two months while both Spanish and Italian ten year bond yields fell sharply. The ECB have made a number of concessions to investor sensitivities, particularly in dropping claims to seniority and accepting a bloated balance sheet.
Even so, sentiment remains mixed. While markets rallied, the FT (£) described the move as “an audacious gamble”, whereas the Guardianoffers qualified approval to Draghi’s decision to “put the mother of all credit cards behind the bar”. The Telegraph’s Jeremy Warner, however, is underwhelmed with what he describes as “window dressing”.
While Europe looks to an exciting new world of dourly acronymed bond purchase programmes, the UK has been given cause to reflect that its own experiments with QE seem not to be working. As we reported, austerity may last longer than previously thought according to the OECD which slashed its growth forecast this year from 0.5 per cent to -0.7 per cent.
Nevertheless, the Chancellor is said to be confident, believing that the economy is “healing”. In a speech to the CBI in Glasgow yesterday he said:
“Jobs are being created , manufacturing and exports have grown as a share of our economy, our trade with the emerging world is soaring, inflation is down, much of the necessary deleveraging of the banking system has been achieved, and the world is once again investing in Britain.”
The Chancellor's optimism, if that isn't too strong a word, expresses a sentiment you hear more and more among business leaders and City folk. A senior banker I spoke to this week described the situation as 'positively negative': the statistics show recession, but there are mildly encouraging signs that suggest the situation - while dire - may not be as bad as indicated. The Treasury points to employment, retail sales, interest rates, falling inflation, increased trade. It hopes for positive GDP figures at the end of October, and that whatever the OECD says the economy might just be positive for the year. Mr Osborne's remarks illustrate the line he is walking: on one side, he risks being accused of being too negative and harming confidence; on the other, it's Norman Lamont and 'green shoots'.
One currency union that appears anything but irreversible at the moment is that between Scotland and the rest of the UK. This morning’sIndependent reports that George threatened to deny an independent Scotland the pound at his CBI speech in Glasgow yesterday- well, hinted strongly, at least.
Mr Osborne said that it’s not possible to have currency union without a full political union. He still backed a referendum on independence - if only to end “the uncertainty that is disruptive for UK and Scottish business alike” (ironic given the Heathrow saga).
The Times called it the “cabernet reshuffle” - boom tish. The papers are filled with reports of Dave’s boozing this morning. He’s been accused of drinking while hiring and firing his new team. We report that he was cradling a glass of wine when he gave Cheryl Gillan the boot, but didn’t offer her one.
The Sun says he’s been accused of “necking plonk” and reports that Ms Gillan is furious. The Mirror says he “swilled red wine” while the Timessays he was “sipping” it. No 10 denies this, but were “unable to say whether there was an open bottle or glass in the room”.
Sam Coates in the Times has another titbit worth reading. He reports that Justine Greening didn’t want the DfId job and told Dave she thought its budget needed reducing. I hear from one source that the exchange was in fact far more violent than initially reported, and that in the heat of the moment - and this is just one account - Ms Greening used rather earthy terms to say that working with foreigners wasn't her political ambition.
There are also reports that the PM tried to justify disposing of Caroline Spelman, 54, on the grounds of her age, pointing out that Sir George Young, 71, was quitting too. No 10 also deny this, pointing out that her replacement, Owen Paterson, is 56. You can read more about this in the Telegraph here.
The accumulation of snippets about Dave's callous behaviour is intriguing. It's tempting to think that it's deliberate, part of an image makeover, with Dave displaying not only urgency but ruthlessness. It's as if he's decided that he might as well play up to his Flashman reputation. I suspect much of this is no more than the inevitable clash of conversations, each side remembering the exchange differently.
Dave is certainly getting fiercer. The FT reports that he’s had it with Boris Johnson’s attacks. A No 10 source is quoted saying: “We will see what happens the next time he comes around with the begging bowl...He might need us one day.”
The FT lists a new rail line from Chelsea to Hackney dubbed Crossrail II among the things Dave could ruin for Boris. Ouch.
And it looks like both Eds are interested in Vince Cable. Yesterday, Ed Miliband told a think tank that he’s been wooing him by text message.
James Kirkupsays Mr Cable’s aides are playing it down, insisting that the exchanges are infrequent and Mr Miliband is just trying to cause trouble. The last message concerned the failed attempt at Lords reform, apparently.
The Mail is not impressed by Vince’s behaviour. Its leader says :
“Fluttering his eyelashes at the opposition would be shabby behaviour at the best of times. But, in case he’s forgotten, we are in the middle of a bitter recession which requires every waking second of his attention.”
TWO EDS ARE WORRYING FOR ONE
The Eds were in the City yesterday launching their big new idea, predistribution. Mr Miliband spoke passionately about increasing the wages of poorly paid workers in a gambit he hopes might connect the economic big picture with the ordinary voter.
Ed Balls was also in attendance, meaning that Mr Miliband would have felt some warm breath on his neck, according to today’s Independent. Steve Richards believes that Mr Miliband is “nervily aware” of his namesake and “gets worked up when he reads that Balls is the real leader of the Labour party”. Still, a little creative tension never hurt anyone - remember Blair and Brown?
VIEW FROM THE 22
Serious geeks take note: Conservative Home’s Paul Goodman points out that the promotion of Karen Brady to the Whips Office strips the 1922 Committee of its joint Secretary. An (interesting?) election should now follow.
GRAVY TRAIN ROLLS ON
One group not short of hard currency can be found on the benches at Westminster. Expenses claims are up almost 25 per cent and now stand at £89.4m. The bill includes receipts for 50 iPads. All the papers run the story, our version can be found here.
“Home Secretary Theresa May is now ‘one of the big beasts of this government’, says oleaginous home affairs committee chairman Keith Vaz. Ms May, 55, says: ‘I thought I had been on a diet!’ – a rare joke from the serious-minded vicar’s daughter.
Some Westminster experts suspect that, as one of David Cameron’s ministerial successes, she is now ‘on manoeuvres’– signalling her interest in the leadership, which she considered in 2005. ‘I don’t answer hypothetical questions,’ is her arch reply when asked if she’d like to be PM. Look out!”
TWEETS AND TWITS
Labour MP Jamie Reed
“@jreedmp: "Which is it David?" she asked "Am I too old or too Young?" Bemused, Dave staggered to his feet, lurching towards her as she backed...”
“LOL” as Dave might say. Does a career in creative writing await, Jamie?
Latest YouGov/The Sun results (September 5): Conservatives 33%, Labour 45%, Lib Dems 8%, UKIP 7%