UK Chancellor Alistair Darling said on Friday UK would not join in any European effort to bail out Greece. This sounds harsh - Darling is no Lord Byron for Greece a la 1820s or no Churchill sending in the british and French fleets in 1916, and BEF in 1941 and the Fleet for some bombardment after WW2, times when Greece was in crisis. Greece should be hlped by other Euro area economies. The UK has much to do given the disproportionately large share of EU financial services in its jurisdiction - additionally perhaps it might get round one day to helping Ireland and being less beligerent with Iceland. Darling has pledged not to use differences in global financial regulations to promote the City of London. That's nice - in fact some would say he has been doing more than that and making London somewhat less attractive - which to me doesn't matter much either way. Others, however, are not so legalistic. It is part of EU law that no EU state should seek to beggar its neighbours or create competitive advantages for its financial sector. Yet, The Mayor of London and other Conservative figures and supporters are saying the opposite that their priority must be to enhance the ttractiveness and competitive advantages of London. fact is they don't know how to do that and would be foolish to imagine that less regulation would do it. the matter is not so simply defined. Calculating the cost/benefits of regulation is business terms is very hard to do.
In repeating my view on Greece, Darling said, when answering questions about a possible EU bail-out of Greece at Davos, that it is a problem as one for the eurozone i.e. the Euro currency states and the ECB, not the wider European Union. (For analysis of Greece see my blog: http://monetaryandfiscal.blogspot.com) “The euro area has primary responsibility for anything that might be happening. We are not involved in that,” he said, reminding all that the UK's 'economics' decision (which I supported for good reasons that are technical not political or cultural) to stay out of the single currency means it is not part of the Euro Grouping that discusses eurozone affairs, adding “It is in the interests of the eurogroup they provide whatever assistance [is required].” The chancellor also made it clear that Britain’s decision not to follow either the proposed US banking levy or the “Volcker rule” (banning proprietary trading by, and hedge funds within, banks) was not an attempt to steal financial services business to London from New York. He said: “I don’t want someone coming to our country because they are avoiding some legitimate concern somewhere else.” This sounds good and good for Dublin!
The chancellor’s main purpose in Switzerland was to meet with banks and urge the all to hasten reforms of banking and global economic management, issues on which he sees backsliding in the G20 agenda. I defined the G20 agenda into 90 tasks, which others have picked up and now bandy about as what is to be done. But, many of the tasks require a lot of detailed work; they involve major changes to what is traded on or off exchanges, to ratings agencies, and not least building new regulatory oversight bodies and then bring in the rest of the world to be fully in agreement and participative. The macro-economic and macro-financial models to underpin all this are however totally not there, and have not been planned yet and those that are underway are game-theory network risk models for dealing with single bank failures - so we do not yet have any governmental efforts behind trying to understand the credit crunch and recession comprehensively in macro-model or macro-prudential model data terms. This means that many policy objectives cannot be followed with support of deep analysis that is globally competent.
Darling said, “The process is presently going through the Basel Committee at a rate I believe is far too slow. We simply don’t have years to sort this problem out. We need to sort it out later this year”. Big models take at least two years! He deplored, according to the FT, the possibility that the main Basel committee recommendations on banking reforms may be delayed from the present timetable of this autumn. “They might slip into 2011 and that would be very, very bad.”
Darling was equally concerned that the G20 framework for balanced and sustainable growth, the international action to address global trade imbalances, was also mired in the mud - think of Flanders and The Western front, main Street versus wall Street with attrition all along the line. Referring to both G20 processes, he said: “There needs to be a sense of urgency that frankly has been absent over there in the last few weeks.” I totally agree, but that's not what happens when the Eurocrats and civil servants generally have to do more than juggle competing opinions.His comments reflect those aired yesterday by Angel Gurria, secretary general of the OECD, who may wonder whether the IMF that is at the heart of the G20 agenda has the firepower for the job and needs OECD in Paris with all its massive brainpower to weigh in too, who said: “I don’t think anything of substance has been done during the crisis to correct global imbalances. It was the crisis itself that reduced imbalances”. If she meant global imbalances in finance she is of course on another planet. She meant global trade imbalances that astute economists know lay at the root cause of the crisis. Trade flows are definitely like scattered jigsaw pieces thrown into disarray. It'll be some time before we see how those pieces fall and that is what is gnawing at the long nails of Forbidden City mandarins in Beijing as they scroll through their beautiful painting of economic statistics. on that no small matter see http://bankingeconomics.blogspot.com/ Time to sell east buy west?
