Sunday, 20 March 2016

Interesting fall-out from the dogfight among Britain's Conservatives

The British conservative party is tearing itself apart over the EU referendum in June. The internecine fighting has reached new highs over the recent days and some quite interesting bits of information are contained in the intense exchanges.

Work and Pensions Secretary Iain Duncan Smith resigned last Friday over a particular line item contained in the budget just presented by Chancellor George Osborne, some cuts in spending for handicapped.

Duncan Smith is also known as a passionate proponent of Britain's exit from the EU, the Brexit, and obviously he is free to campaign for his views from outside the cabinet. The British press has over the weekend been full of all kinds of guesswork about his reasons to resign.

The most interesting in this exchange is in fact Duncan Smith's resignation letter, which contained the following statement:

"I am unable to watch passively while certain policies are enacted in order to meet the fiscal self imposed restraints that I believe are more and more perceived as distinctly political rather than in the national economic interest".

Please read this again. One of the uncompromising conservative politicians in the UK states that the economic policies are subject to "fiscal self-imposed restraints".

He is talking about the balance budget target zealously pursued by Osborne in close cooperation with Prime Minister Cameron.

In a few words Duncan Smith revealed what has been clear to economists for a long time: Pursuing a balanced budget at all times is simply a question of ideology rather than the "national economic interest".

In the days after the presentation of the budget, there was a discussion about what would happen if the optimistic growth projections behind the budget did not materialise.

Osbornes view was that it would then be hard to balance the budget, unless further public sector cutbacks were introduced.

So there it is: The British economic policy is driven by the same ideology as the fiscal policy in Germany - and which Germany does everything to stamp upon the rest of the Eurozone.

So at least it has become clear that there are no real economic arguments for the wish to leave the EU.

Former PM Sir John Major is trying to make the opposite point: that there are significant economic reasons for Britain to stay. Britain can not expect that EU should be rushing to give Britain a privileged status, as Britain needs the EU more than the EU needs Britain. Major is afraid the Britain will find herself “sleepwalking into antagonisms it cannot repair”.

I notice use of the word "sleepwalking". Major basically tells his party to wake up and try understand what is at stake.

I am afraid that given the intensity and the personal focus of the exchanges inside the conservative party, his words are likely not to be heard. A good personal jibe is easier to sell to the press than a long historic argument about the role of the EU.

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