Europe's Banks May Get €200bn Bailout

A potential €200bn (£175bn) recapitalisation of the European banking sector loomed yesterday after the French and Belgian governments unveiled a rescue package for Dexia to stop the bank's woes from contaminating the wider financial system.











The planned boost to banks' capital reserves will see national governments in line to inject new cash if the lenders cannot raise the money in the market.

The urgency of increasing eurozone banks' buffers against losses was heightened by the near-failure of Dexia, the French-Belgian bank with big exposures to debt issues by Greece and other financially stretched countries.

The deal to bail out Dexia was designed to stop the bank's crisis spilling out into the rest of the banking sector. The fates of troubled eurozone countries and the region's banks are intertwined and threaten a vicious spiral of losses.

European leaders yesterday delayed by a week a meeting scheduled for next Monday to leave time to receive a definitive report on Greece's fiscal crisis.

Belgium will pay the Dexia Group €4bn for the Belgian retail banking business and provide 60 per cent of state guarantees for a "bad bank" to house Dexia's troubled assets. France will provide 36 per cent of the guarantees, which cover up to €90bn of funding, with Luxembourg supplying the rest.

Dexia's balance sheet of €518bn is bigger than the entire Greek banking sector and is a similar size to the total assets of institutions rescued in Ireland. The bank passed European "stress tests" in July that were meant to shore up confidence in the banking sector.

France and Germany have agreed that Europe's banks should be made to raise extra capital to cushion the impact of a Greek default. The International Monetary Fund has calculated that the region's banks need up to €200bn of extra cash to withstand losses.

Alistair Ryan, an analyst at UBS, said: "If capital is to have any chance of stabilising the banks, it will need to be large: we would start with the IMF's €200bn." He said eurozone governments could end up owning 40 per cent of the sector if they supply the capital.

Markets were calmed by hopes that France and Germany would finally come up with a plan big enough to support the eurozone's banks when Greek defaults – an event seen as inevitable.

The Eurostoxx 50 index closed up 2.3 per cent and the euro rose 1.9 per cent to $1.3648.

The cost of Dexia's bailout has raised questions about France's and Belgium's national credit ratings. France's Finance Minister, Francois Baroin, stressed that Dexia was a "unique" case and that other French banks would not need bailouts. However, many believe France's Société Générale and BNP Paribas would be part of the recapitalisation plan.

UK Economy Needs More Than Quantitative Easing To Recover

Britain's cycle of rising debt and dependence on consumption to drive growth make it unlikely to bounce back any time soon.












Britain has just been through what is now officially the deepest slump since the Great Depression – pictured, the unemployed marching in London in 1930.

Britain has just been through what is now officially the deepest slump since the Great Depression. Economic data from the pre-war era is not 100% reliable, but the drop in output after the sub-prime mortgage crisis appears to have been almost on a par with the contraction following the Wall Street crash. What's more, the recovery – such as it is – has been even slower than in the 1930s.

Talk of a lost decade is not misplaced. The economy is likely to grow by barely 1% this year and will struggle to do much better than that in 2012. At this rate of progress, it will be 2016 before output returns to its level when the recession started in early 2008.

This performance looks all the more miserable when you consider the amount of stimulus that has been thrown at the economy. Interest rates were cut to 0.5% in early 2009 and have remained there. The government has borrowed £390bn in total in the last three fiscal years. After printing £200bn of electronic money, the Bank has decided that is not enough and has announced plans to do a further £75bn of quantitative easing. The image that springs to mind is of John Cleese's response when Michael Palin's pet shop owner insists that were the Norwegian Blue not nailed to its perch "it would nuzzle up to those bars and 'voom'".

"Voom?! Listen mate, this bird wouldn't voom if you put 4 million volts through it. 'E's bleedin' demised."

This is not the view of George Osborne or Sir Mervyn King, although both admit it is taking a while for the dead parrot to awake. King said last week that the UK was in the grip of a financial crisis at least as severe as that in the 1930s and perhaps the worst ever. The chancellor has repeatedly warned that it will take a long time to recover from the debt binge of the last decade. Most post-war recessions were caused by a tightening of economic policy in response to inflation, but that of 2008-09 was the result of individuals and banks borrowing too much.

Still, the mainstream view is that sooner or later things will get back to normal. Over the past two centuries, western economies have always bounced back from economic traumas, no matter how severe. It is taken as read that industrial capitalism is inherently robust and adaptable. It is perhaps time to challenge this assumption.

The first piece of evidence comes from the Office for Budget Responsibility, the independent fiscal watchdog created by Osborne when he became chancellor. Forec asting has been outsourced to the OBR, which expects growth to be quite perky in the years ahead, leading to a fall in the UK's budget deficit. Crucially, though, this is only because the OBR expects household debt to rise in the years ahead, from £1.6tn in 2011 to £2.1tn in 2015.

Alert readers will spot the circular argument here. Britain has a personal debt bubble that goes pop. Government steps in to clear up the mess and ends up with record peacetime debts itself. The cure for this is to get individuals borrowing again. Well, maybe. All the signs are that this will prove harder than the OBR imagines, resulting in weaker growth and a higher budget deficit.

This leads on to a second point, which is whether the UK variant of modern industrial capitalism is really as robust and adaptable as our policymakers would have us believe. The story of the past 25 years and more has not been of a new model of sustainable growth emerging from the old. Not since the mid 1990s has there been a period where the motor of growth has been production rather than consumption. For the rest of the time it has been the tale of asset-price booms, the withering of the productive base and the onward march of big finance. Following the bubble to end all bubbles, the taxpayer had to dig deep to bail out the banks and prevent an even deeper recession, pauperising the state in the process. A model that relies on excessive personal indebtedness and ends with the innocent suffering from extreme austerity seems neither robust nor adaptable, just bankrupt.

Britain has not been alone in its long march down this dreary road, but it has travelled further down it than any other developed western country. King and Osborne agree something has to change. The upbeat vision of the future goes something like this: Britain, despite everything, has a sizeable manufacturing base and can enjoy the benefits of a 25% drop in sterling since 2007. The UK has top-notch scientists who will deliver a new wave of innovation. It has an independent central bank that knows what it is doing and a Treasury determined to keep interest rates low. The banking system is being repaired. Credit will eventually start to flow again, taxes will at some point come down, consumers will pay off their debts and firms will start investing.

The dystopian vision of the future sees Britain displaying many of the traits of a developing country. Here's what a typical developing country looks like. It is governed by an elite and there is a gulf between rich and poor. The elite extracts economic rents from the rest of the population, then salts them away in tax havens. Developing economies often rely heavily on one commodity, which crowds out activity in other sectors. To the extent that they have an industrial base, it is as an assembly plant for foreign-owned transnational corporations. The country tends to be deficient in physical infrastructure and human capital. All too often the best brains leave the country.Now consider Britain. The country is dominated by the City, which exerts an extraordinary amount of political power. There is a widening gap between rich and poor. The rich find ingenious ways to avoid paying taxes. Large parts of the country are dependent on the public sector, while the private sector is increasingly dominated by financial services. Industry makes up a smaller and smaller part of the economy and not one world-class manufacturing firm has been developed from scratch since the second world war. Firms complain they can't find skilled labour. The infrastructure is a joke – witness the lack of snowploughs to keep Heathrow open during last winter's snow. This is not an economy that is going places: it is going south.

Economic Crisis: What Is The End Game?

The cycle of woe and uncertainty surrounding the economic crisis continues, with gloomy surveys predicting a double dip, and even fears of a ‘Great Depression'. Sir Mervyn King, Governor of the Bank of England, believes this could be the worst financial crisis ever - even beating the 1930s for gloom - and the economy is in breakdown, so what we want to know is:



















How grim are things going to get?

Yesterday various reports told us the UK was bottom of the global confidence league, 43% of finance directors were preparing for a second recession while companies had delayed or cancelled £4.7bn of spending, reports the Daily Telegraph. "Today we report the OECD's leading indicator falling for the seventh month in a row, pointing to a slowdown, and the British Chambers of Commerce warning on stagflation."

Mindful Money asks commentators what they think will happen:

While we don't know if the recent injection of more QE will do any good, we do know that it automatically invites stagflation into our economy by pushing the pound down, say commentators.

According to Mindful Money economist blogger Shaun Richards, the most likely outcome if both politicians and central banks continue with the policies that they have now is, indeed, stagflation.

But he adds: "Those who look at the past I think miss an important point which is that it doesn't have to be 10% inflation to hurt people. A continuation of 5% a year combined with wages only rising say 2% will gradually turn the screw. Let's face it this has been happening already for the last couple of years so in general people are poorer."

Investors Chronicle says that Andrew Sentence, a former member of the BofE MPC believes that inflation is a bigger concern for the UK economy than a recession."High inflation and slow growth are inextricably linked."

What happens if stagflation hit?

Stagflation is a term which is formed by joining the words stagnation and inflation. It is used in modern macroeconomics to give a description of a period of uncontrollable price inflation combined with sluggish output growth. Stagflation raises unemployment.

The last time stagflation held the western world in a seemingly lethal grip was 30 years ago in the 70s and 80s, and it is threatening to emerge from the shadows again. Such fears are dismissed as irrelevant by those in favour of pumping money into the economy through quantative easing (QE), which they think will stimulate growth and avoid the dreaded ‘double-dip' recession. But so far, this policy has failed to prompt the necessary growth.

Thursday's announcement of another £75billion worth of QE played well with the stock market, but it is unlikely to cause much cheer for long. On the contrary it threatens to stoke inflation even higher, and meanwhile, there is the threat that growth stagnates.

"Stagflation" remains a word not uttered in the polite company of the financial world.

"But there remain only a few more tumblers to fall into place for a return to that awful word that conjures up images of the "malaise days" of the late 1970's and early ‘80s, where rising inflation and slumping employment tramped down economic growth," says CNBC,

However, some economists believe stagflation isn't something to fear at present.

Azad Zangana, European economist at Schroders, says: "While the current environment feels like a typical stagflationary environment, this is set to be temporary. The outlook is more positive as we expect inflation to fall from its current level back down to below 3%, mainly due to the passing of the VAT effect from the start of 2011.

"Meanwhile, we forecast growth to improve in the second half of 2012, and so the balance between real and nominal growth will improve. To conclude that we are entering a fully fledged stagflationary period, we would need to see significantly stronger inflation and wage inflation, and a continuation of weaker growth as seen in the 1970's. In our view, this is unlikely to occur."

What other threats may there be?

Another danger, however, is the rising threat of hyper-inflation. Shaun Richards says: "Whilst the self proclaimed "financial geniuses" persist in buying every gilt they can find there is a danger of this. Also it is the nature of things that when problems happen these days with the speed of trading it happens so fast that it is better not to run the risk at all. But I see this as rising but still low.

"So for now the danger is the silent drip drip of inflation and this is the enemy. The biggest problem of all is that as I keep pointing out it should not be a problem at this stage of the economic cycle and furthermore is being inflicted on us by individuals whose own contracts protect them against it.."

And if we're being warned that this crisis beats the 1930s, what happened then?

What happened in the 1930s, given the governor believes the gloom beats this decade? This was the ‘Great Depression', where in America millions were genuinely destitute, and unemployment hit a staggering 25%. Two million Americans tramped the country, sleeping rough as they looked for nonexistent work, and malnutrition was widespread.

Southern England escaped reasonably lightly, but in the North there were pockets of extreme hardship. On Tyneside the collapse of shipbuilding left unemployment standing at 70%, prompting the famous Jarrow march.

There were soup kitchens on the streets and millions of families were subsisting on bread and margarine. In Germany, economic misery that had begun with hyperinflation in 1923 helped another world leader to power in 1933: Adolf Hitler.

So is there any cause for hope with growth and falling inflation?

Henderson's chief economist Simon Ward gives his opinion: "Assuming that an EMU break-up is avoided, the global economy may start to regain momentum from early 2012. Such a scenario depends on the US economy doing better next year, as suggested by recent money supply strength...

"Another reason for thinking global growth could revive from early next year is a fall in headline inflation due to recent weakness in food and energy commodity prices. Rising inflation has been a major contributor to the recent economic slowdown by squeezing consumer spending power and forcing monetary policy restriction in emerging economies."

And anyway, nobody knows.

Mindful Money's resident psychologist Kim Stephenson says: "Let's assume that Shaun's right..

"Afterwards, lots of people who said that we wouldn't get stagflation but something else (hyperinflation or whatever) will say - "ah, well, it depends on how you define stagflation (or hyperinflation, or whatever)", they'll twist it round to show that they were right when they were actually wrong. Or they will point to some action or event - from the Bank of England, IMF, German Government, something, and say "if that hadn't happened, it would have gone the way I predicted". Human beings don't like being wrong and they will selectively remember what they want to remember to avoid having to admit they were wrong.

"Similarly, human beings like being able to predict and control their world . The economy isn't just out of our personal control, it's clearly out of control (or even prediction) of anybody like the Chancellor, the EU etc. that are supposed to be able to control it. That is very scary. It's like when you're a child and you realise for the first time that your parents don't know everything, can't solve every problem, can't ease the pain, stop the bully or get you on the team every time. It hurts and it makes us afraid, so we desperately cling to the belief that somebody can predict it (if not control it) and that we can have some measure of understanding of what is going on. To contemplate the fact that actually nobody controls it, nobody really understands it or can predict it and that most of our predictions are going to be wrong is simply too much to take."

Will The Increased Offer Of Declining Pound Save British Economy?

Forex news. World economy is under the threat of crisis, which can become the most difficult ever and have more large-scale consequences than the Great Depression in the 20th century. This is how the current situation is viewed by Mervyn King, the Governor of the Bank of England.










The decision to expand the quantitative easing program, which was taken by the Bank of England on Thursday, is predetermined exclusively by the difficult economic situation worldwide, particularly in Britain.

Drawing historical parallels, Mr. King claimed that the current condition of world economy is characterized by the total deficit of money supply. Therefore, Central Bank emission is aimed at solving this problem, and the Bank of England decision to increase money supply is to be regarded exclusively from this point of view.

However, global crisis can only be overcome provided that there is a consensus at the highest level.


It is predicted that the entire sum of emission, ₤75 bln., will be directed at stimulating economy and increasing money offer. At the same time, Mr. King assured that inflation is unlikely to result from held recession. In general, he predicts that inflation will increase up to 5 percent in the nearest future; however, next year it will stop increasing and start declining rapidly.

Meanwhile, the rate of British pound has stopped forming long-term wave А(С) or reduced wave С(С) within long-term bear motion, which will be proved by passing pivot Mf at the point of 1.5665. Experts of the Department of Masterforex-V Trading System claim that subsequent FZR will start long-term correction wave В(С). Passing the bottom line of 1.5271 will continue long-term decline; however, before this happens GBPUSD pair will meet support at the points, where pivots MF are placed, namely, 1.5468 and 1.5296.

Dustbowl Britain: The New Depression

YES, it’s official: this could be worse than the Great Depression of the 1930s – men slumped on street corners and kids with bare feet.

Inflation, fascism and economic war in Europe. “This is the most serious financial crisis we’ve seen at least since the 1930s, if not ever,” says Sir Mervyn King, governor of the Bank of England.












Now, I may be missing something, but isn’t this just the kind of alarmist headline-grabbing remark that central bankers are supposed NOT to make in case it spooks the markets? It’s people like me who are usually criticised for resorting to sensational forecasts about Great Depressions and the like. The commentariat is being done out of a job by the godfather of prudence. Whatever happened to “Keep Calm And Carry On”?

The Prime Minister, David Cameron, is said to be livid. Only 24 hours before King forecast the end of civilisation as we know it, Cameron had told the country to “bring on the can-do optimism”. Well, not in the Bank of England, clearly.

It’s hard not to read this as an implicit condemnation of government economic policy. At the very least, the PM and his Chancellor look as out of touch as the Labour PM, Jim Callaghan, when he said “crisis, what crisis”, just as the International Monetary Fund was about to take over the reins of the British economy in 1976.

So what has spooked Mervyn? Well, it’s the Greeks isn’t it, stupid? Actually, it isn’t the Greek default – it’s us. Mervyn’s panic attack coincided with the news that ratings agency Moody’s had downgraded the status of a raft of British banks just as inter-bank lending was seizing up.

Essentially, Moody’s is warning people with money in banks including Royal Bank of Scotland, Santander, Lloyds and so on that they might not get it all back. Why? Because the banks are becoming stressed again, just like 2008, and there is no chance that this time the Government will have the will or the means to bail them out. There’s very little public money left and the economy is slowing to a halt, which will make it hard for the Government to pay its own debts, let alone that of the banks.

The bailout of the UK banks in 2008-09 required £1.3 trillion, according to Mervyn King’s own figures. And what did we get for putting up all that money? Well, Stephen Hester of RBS got £11 million last year. Bank bonuses accounted for another £13 billion. The rest disappeared into the bowels of our rapacious financial institutions.

So what now? Well, if there isn’t any public money, let’s just print some. The last round of quantitative easing – creating more money – placed £200bn in the banks’ accounts in 2009.

What happens is this: the Bank of England electronically creates money, which it uses to buy bonds from the banks. This injects funds directly into the banks’ balance sheets, wiping out their losses and “restoring the health of the financial system”. The money is supposed then to be loaned to small businesses and people wanting mortgages, thus boosting economic growth.

Except that this didn’t happen. The banks hoarded it instead and paid themselves huge bonuses. All QE1 really succeeded in doing was increase inflation to 5%, which is generally what happens when governments print money. This has eroded people’s savings, pensions and salaries, meaning that they haven’t been buying much in the shops. Which in turn is why the economy is sliding back into recession. Britain has one of the lowest growth rates in the OECD and has one of the highest fiscal deficits. Stick that in your budget, Mr Osborne.

So why on earth is the governor printing another £75bn of QE? It looks like the economic equivalent of blood-letting: a pointless medical procedure that only weakens the patient. This is the great unanswered question of the age: why are policy-makers unable to see any solution to economic crisis that doesn’t involve stuffing the mouths of bankers with gold?

When historians look back at this period they will criticise governments for inactivity, short-termism and denial. But they will condemn them utterly for throwing oceans of public money at the very people who caused the crisis and were least to be relied upon to resolve it.

Instead of handing money to banks, in the vain hope that it will boost economic activity, why doesn’t the government hand it to poor people?

I’m not joking. At least lower-income groups can be relied upon to spend the cash in the high streets – in shops like Tesco, which has just announced its worst sales figures for 20 years. Give them VAT rebates, interest-free loans, tax “holidays”, elderly care grants, home improvement loans – anything to get money into the system.

Giving liquidity to people who don’t have it is the surest possible way of boosting economic activity. QE is like trying to get the car started by giving money to oil sheiks in Saudi Arabia.

Of course, the bankers would respond that, yes it’s all very well giving money to people other than us. But if you don’t hand over your cash, we’ll just go bust like Lehman Brothers, and that will cause a global financial and economic collapse. Ha ha.

And of course, they’re right – they are too big to fail. If, say, RBS went under, the shockwaves would be so great that bank lending would halt overnight. This means that companies which depend on short-term loans from banks to manage their accounts would go under too. International trade would freeze because there would be no credit for exporters.

There would also be a run on the banks, as happened in October 2008, when people and businesses withdrew their cash from banks like Northern Rock and HBOS because they didn’t believe their funds were safe. In 2008, according to the then chancellor, Alistair Darling, Britain was 24 hours away from the ATMs closing and people being denied even cash withdrawals.

Could we really be going back to all that? Well, yes – the Belgian-French bank, Dexia, has just gone bust for the second time in three years because people started withdrawing funds at an unsustainable rate and its share price collapsed. It could be the first of many, and governments cannot bail them all out.

Which means that if you are lucky enough to have more than £85,000 in any one bank – the limit of the deposits guaranteed by the government’s deposit insurance scheme – then you’d be well advised to get it out sooner rather than later.

I know that sounds alarmist,

inflammatory, but listen closely, and that’s what the Guv’nor is saying.

But there is an alternative. Instead of pouring more printed money into the banks, why not nationalise them completely? We already own RBS and most of Lloyds. The nationalised banks could be used to set up smaller, more responsible banks with a remit to lend to industry rather than speculate on derivatives and the commodities market, which is what they have been doing since 2009.

If the financial crisis really is as bad as King says it is, and we are about to drown in a hyperinflationary sovereign debt crisis, then the Government would be able to freeze asset deposited in the banks and conduct a kind of debt “triage”.

Those with more than £85,000 in deposits would be required to accept a proportionate reduction in the value of their deposits in order to stabilise the financial system and remove the debt burden on the state. This could be done by converting bank deposits into government bonds, redeemable at a later date. This is rather like QE in reverse. Needless to say, all bank bonuses would be scrapped, and bankers put on civil servants’ salaries.

There would be howls of anguish from the rich at their wealth being hijacked in this way. But they should be told that the alternatives are much worse: a run of bank failures, which means they would lose ALL their funds over £85,000. Bondholders would not just have a haircut – they would be decapitated by default or by hyperinflation.

There is still a great deal of wealth in Britain – £7 trillion in household assets alone, according to the Office for Budget Responsibility – but this is largely held by the very wealthy and “sterilised” in property and other assets. If we are facing the ultimate crash, the Government will have no choice but to commandeer these resources and use them constructively to manage the national finances. President Franklin D Roosevelt did something similar in 1933 when he ordered all the gold held by individuals to be deposited with the government.

I doubt if any politician has the cojones to put this kind of scheme forward right now – most of them are intellectually in hock to the City of London anyway. But what is not in doubt is that the Bank of England is already thinking the unthinkable.

Various schemes for crisis debt restructuring are surely already being run through the Bank of England’s computer models, and though they can’t admit it, this will inevitably involve some control of bank deposits and an orderly run down of debt. The Government will probably opt to raid pension funds first, because they are harder to move offshore. This is what the Argentine government did in 2001 when it defaulted.

What the Bank of England governor is warning of is a truly apocalyptic financial event. The Government has already seized large parts of the banking system and resorted to money printing. It may not be long before it breaks into people’s accounts directly. You have been warned.

Ed Miliband Has Offered An Alternative – But Will Anyone Vote For It?

Miliband's indisputable leftward shift has put Labour at ease with itself but risks making the party less relevant than ever.












Ed Miliband hopes his vision, that he set out at conference, will connect with 'the country's wider shared values'.

Many years ago, I was walking down a street in London with a rising Labour politician. On a lamppost we caught sight of a poster advertising a SWP meeting. "Is there a socialist alternative to Kinnock?" the poster asked. "Yes, there is a socialist alternative," laughed Gordon Brown. "But the problem is that no one will vote for it."

Ed Miliband is certainly no Trotskyist. But his speech to the Labour conference in Liverpool this week is already raising some of the same questions that the old SWP poster did. For Miliband is gambling that there is an alternative to contemporary orthodoxy. He believes that the experience of financial collapse, public spending cuts and recessionary inequalities requires a resetting of the collective moral and economic compass. Crucially, he believes that the electorate can be persuaded to embrace it.

Miliband chose his words very carefully. Terms like socialism and capitalism do not appear in his speech. But they were implicit in it. Read in conjunction with the recent New Statesman article by Miliband's strategist Stewart Wood, this week's speech adds up to an attempt to reclaim social democracy as Labour's core route-finding principle. Cautious it may be – Wood sees Labour's aim as the creation of "a better capitalism", which won't please everyone in the Labour ranks – but the argument is put with clarity. It is indisputably a leftward shift from the New Labour years. It is also what Miliband has always wanted, which helps, sort of.

The large question now is whether Labour will succeed in shifting the national argument so that his version of social democracy stands at the centre of public debate. Miliband's conviction that it can is central to his entire leadership. It was embodied in the many sections of this week's speech that tried to connect Miliband's own vision with the country's wider shared values. If he succeeds in setting an agenda of market, welfare and community reforms that voters really want to and do believe in, then he may indeed reshape British politics. But if he fails, Labour's slide to the political margins will continue.

Less than three days after the speech, most of the reaction to it has already fallen into one of two camps. These strike me as too crude in both cases. On the one side there are those who welcome Miliband's commitment and think he can succeed – this was the general mood at Liverpool. On the other there are those who dismiss what Miliband said and think his approach is doomed to failure – which is what the Conservatives will undoubtedly say next week in Manchester.

In fact, the impact of Miliband's speech could be less straightforward than that. This is not an argument between a wholly laissez-faire approach and a wholly dirigiste one. In reality it is an argument about shifting the balance within a narrower set of priorities than those who insist on talking about the end of neoliberalism ever admit. Even so, this was one of the few party leader's speeches that may be remembered for longer than a week after it was given. Most of its actual phrases may already have gone down our mental chutes into the waters of oblivion. But it is quite likely that a lot of people will remember this as the moment when Miliband turned the party away from the New Labour orthodoxy that compromise with global markets is inevitable.

But there are turns and turns. To take an obvious example, which Miliband will have to address eventually, there is all the difference in the world between maintaining the coalition's tax and spending levels and committing to raise them. There is also a gulf between attacking economic predators and extolling producers, as Miliband did this week, and putting strict regulations in place to deny the former and promote the latter. And there is a massive difference between being a party of free trade, a principal that the left has always managed to embrace, and being a party of protection.

If he is dumb, Miliband may be tempted to do what the Tories would love him to do and promise to clamp down directly, almost certainly ineffectively and in all probability with unintended consequences, on morally indefensible excessive pay and bonuses. If he is smart, he will use the bully pulpit, as he did on Tuesday, at least as much as the tax system to encourage the better capitalism, and the better companies, to which he aspires.

The idea that there might be a workforce representative on remuneration committees caused outrage in the rightwing press this week, but it ought to be just the start, not to an expanded role for the unions, but for well-argued and flexible new models of workplace co-determination of the kind that have done so much for German companies.

The best news for Labour I heard in Liverpool is that Andrew Adonis is planning to focus on new thinking about industrial policy, a subject riddled with old ideas, especially in the unions, but which is crucial to any long-term reimagining of the UK economy. It does not follow that the left's traditional state-centred responses are the new centre ground just because people are outraged by the bankers and by indefensible wealth.

The experience of the last three years suggests public opinion has moved to the view that government deficits are part of the problem, rather than the solution. Thursday's vote in Germany and this week's budget in France were the latest reminders of that. Labour was canny about the economy this week: Ed Balls got the balance right in his speech. But parties of the left are losing ground across the world right now and Labour shouldn't imagine there is a magic moral bullet that will enable it to buck that trend.

Labour's move to the left can be, and has already been, exaggerated – by friend and foe alike. Yet it has been a significant declaration by the party nonetheless. The coalition parties will undoubtedly respond, and not merely with abuse and caricature. Expect surprise moves that try to undermine Labour claims to ethical uniqueness.

Electorally, the danger for Labour is that the party will have convinced itself that it has rediscovered its own sense of ethical virtue without persuading sceptical voters that it can run the economy. The party may be more at ease with itself but less relevant than ever. Miliband may want to see himself as the new Clem Attlee. But his ratings suggest that the voters still see him as the new George Lansbury – an unworldly leader and an electoral failure.

David Cameron: 'Recovery Out Of Recession Will Be Difficult'

Prime Minister David Cameron has warned that the recovery from the recession will be ''difficult'' as shares continue to fall and investors worry about the global economic outlook.



Addressing the Canadian parliament in Ottawa, Mr Cameron said the economy was still suffering from the economic collapse of 2008.

Finance ministers and central bankers from the G20 group of countries have promised a "strong and co-ordinated response" to the problem.

Operation Twist Won't Be Enough To Save The World Economy

Twist and shout....loudly, for help. The $400bn action taken last night to by the Federal Reserve to boost the US economy backfired, by alarming the markets it was meant to reassure.

Global shares fell sharply this morning with £56bn wiped off the FTSE 100 index - that's our pension money, by the way.

Taken along with the International Monetary Fund's stark warning of a 300bn euros black hole in the eurozone banking system, due to sovereign debt risks, the Fed's move was interpreted, correctly, as an index of just how bad the situation is out there.


















U.S. Federal Reserve Chairman Ben Bernanke hopes that Operation Twist will help boost the U.S. economy.

Operation Twist, as Bernanke's $400bn mission is nicknamed - is so-called either because it has not been attempted for 50 years, when the Chubby Checker song was in the hit parade, or because it is an attempt to twist the 'yield curve' - in simple terms, to bring down long-term interest rates and thereby boost economic growth.

I could explain this in full, but believe me, you wouldn't want me to.

Along with Operation Twist, the Fed issued a gloomy prognosis on the US economy and the risks from the eurozone, echoing the sentiments from the International Monetary Fund that time is running out rapidly to fix the vulnerabilities in the financial system.

The financial crisis that had its genesis in the banking system was always going to spread to sovereign nations.












The financial crisis that had its genesis in the banking system was always going to spread to sovereign nations.

Now we are indeed entering a new and dangerous phase, and the really worrying thing is the utter and abject lack of convincing leadership, the absence of any big world figure with a convincing vision of how to get out of this awful mess, and what the world might look like when we eventually do.

Share markets have been incredibly febrile so the FTSE 100 and other indexes are quite likely to bounce back.

But this is a deep and real crisis.

The eurozone is facing an existential crisis and the US as the world's dominant economy, is staggering under a mountain of debt.

Hang on to your hats.

Alistair Darling: 'You Can't Just Tell Half The Story And Still Be Credible'

With the publication of his new memoir, the former chancellor talks about Gordon Brown, economic meltdown and the time he was locked out of the White House.












Alistair Darling's memoir contains an anecdote of such peerless absurdity, you literally could not make it up. The chancellor and Gordon Brown were visiting the White House in November 2008, for a crisis summit of leaders and finance ministers, and set off in a cavalcade from the British embassy. But such was the size and self-importance of Brown's entourage, who piled into the fleet of cars, that the chancellor was left to find himself a space in the very last car. When Brown's car pulled up before the steps of the White House, and the cavalcade drew to a halt behind, Darling was still at the back of the queue, stuck outside the gates on the street. He got out, walked up the drive to the door, and found it closed.

"It was a very funny feeling. You've seen the White House all your life, and then you're walking up the steps of this house, and the door's shut, and there's all the world's press behind you taking pictures, and I thought, well, what if no one answers? Because you'll look bloody silly walking back down the stairs."

What went through his mind? "Well, my thinking was – and I never thought I'd think this – I've never been so glad to see President Bush. Because the door opened, and there was the proprietor, the president of the United States."

As he recalls the moment he has a dry chuckle – the wry sort of funny-old-world laugh of someone long past the point when anything could upset him. But he wasn't laughing at the time, was he? "Well, as I walked up the drive, and especially when I had to negotiate terms with a guy with a machine-gun, no, at that stage I was getting very pissed off. I thought this is ridiculous. I just thought this is so typical of what is happening now. You know, [Brown's entourage] were totally absorbed, it was like they were there with the Sun King."

What did he say to Brown when he got inside? "Nothing," Darling says. "I don't think he even noticed."

There was always a touch of the eternal bridesmaid about Darling. He jokes that his obituary will bear the epithet A Safe Pair of Hands, which I suspect he would consider a compliment, and he has seemed most at ease in the background. But before his memoir even went on sale this week, pre-orders alone had already put it second place on Amazon's bestseller list – and its revelations about the depths of dysfunction within Downing Street have made it a political sensation. When I congratulate him on producing a bestseller he looks rather boyishly pleased, but says he's worried that people think he's written a gossipy Westminster kiss and tell – when he never really wanted to write about his relationship with Brown at all.

"I wanted to give my account of the banking crisis, to leave my record. But because the banking crisis became an economic crisis, the two are totally inter-related, and you can't tell what I did as chancellor without touching upon the other crises that hit the government. You just can't tell half the story – and to be at all credible, I have to touch on things that I still find difficult."

It may have been difficult, but he looks so much more relaxed than he ever did in office that I wonder if the memoir became a form of therapy, or at least catharsis. "No," he says very quickly. "No, I'm not someone who needs a cathartic moment." The denial has a hint of Scottish distaste for such self-indulgence – but it's so swift that I'm not entirely convinced."Well, maybe I actually do and I don't know," he concedes. "But it didn't start out that way."

He had to explain his difficulties with Brown, he says, because otherwise none of his story would make sense. For example, "You can't explain the reaction to the interview I did with you three years ago without going into what I regard as the more unpleasant aspects of political life." In August 2008 I interviewed him at his croft in Lewis, and his assessment of the economic crisis facing the world – "arguably the worst in 60 years" – provoked an almighty commotion, fuelled largely by Brown's own aides, who briefed the media that Darling was either deluded and plain wrong (or naive and unprofessional), or treacherously disloyal. Darling later described their assault on him as "the forces of hell".












Darling in Washington in 2008 at the summit during which he got locked out of the White House.

"In some ways," he says, "I owe a debt of gratitude to the briefers. If they had done the usual thing – said they were happy with the chancellor, he's doing his job – it would all have blown over. But as it was it will be remembered. Very few things in politics cut through – and this one did, it cut through with a vengeance. The only critical thing you could say, really, is that I should have said 100 and not 60 years."

What a lot of people won't understand, I say, is why you didn't ring up Brown and say I'm the chancellor, tell your minions to shut up? "Well, you know, I did. I said this is just making it worse for everybody." So what did Brown say? "He just said it wasn't his people. I said well, if it isn't then some imposters are making a remarkably good fist of it. Anyway," he says, breaking off with a brisk shake of the head, "this is just – " but then he stops again. "No," he corrects himself, "it's not water under the bridge, because that weekend really scarred me."

He insists that he didn't think he had said anything controversial, let alone disloyal. Amid the furore, however, some critics interpreted his interview as a calculated strategy to undermine Brown. In fact, Darling says, he hadn't wanted to give an interview at all. He just wanted to go on holiday, to his family croft on Lewis.

"So my cunning plan was to say you'd have to come to the Outer Hebrides; I hoped the Guardian's finances wouldn't stretch to that. But it clearly didn't work." Does he regret what he said? "No, I thought it was important to tell the truth." The problem was, Darling's view of the truth differed radically from Brown's, who was busy telling journalists that the credit crunch would be over within six months.

It was the first very public sign of a clash between No 10 and 11, but Darling had realised he was no longer part of Brown's inner circle as soon as they became neighbours. He still doesn't know why. Had Darling shared, I ask, his colleagues' worries about Brown's famously "psychologically flawed" character before he succeeded Tony Blair? From his rather vague and evasive answers, I'd say that he did not, and was as surprised as many others when behaviour he'd attributed to Brown's grievance with Blair – secrecy, tantrums, paranoia – didn't vanish with his relocation to No10.

The contrast between the two personalities that emerges from Darling's memoir is so extreme, the miracle has to be how much they managed to achieve in spite of it. The person who Darling says kept him sane was his wife Maggie, an infectiously gregarious and irreverent former political journalist whom I met in 2008 on Lewis. At the time I remember wondering how on earth she could put up with Brown, and marvelled at the difference between the two families. I last saw her during the general election campaign, when she invited some women to No11 for drinks. As guests arrived she plonked their coats on the bed in their bedroom, for all the world as if it were a student house party. At some point in the evening her husband came home, and after a bit of chat went to bed. Later, another guest – a little worse for wine – tottered down the hall to retrieve her coat, swung the bedroom door open, and found herself gazing at the chancellor of the exchequer in his pyjamas in bed. As she backed out, doubled over with mortification, nobody was more convulsed with giggles than his wife.

When they left Downing Street for good a few weeks later, he says there was no lump in his throat or tear in his eye. In fact, after five bizarre days of post-election shenanigans between the party leaders, Darling was so fed up he wanted to leave by the back door. Did it feel farcical by then? "It did. Sitting in the flat, watching the TV, with helicopters going round and round overhead, and they were starting to film the back door. So Margaret said: 'This is ridiculous, we're going out the front door.' And she was right. She said we did our best for all these years. Why would we sneak out the back door? Let's leave with our heads high."

But he says no bit of him was secretly relieved to have lost the election. So what will he do instead of frontbench politics? "You continue to do backbench politics." Then if this is the end of your ministerial career, I begin to say – but he quickly interrupts.

"Well, it may not be."

Normally, when ministers lose office and write their memoirs they are practically giddy with indifference to any ramifications. Darling doesn't give the slightest impression of having detached from political life, or stopped caring for a minute. "One of the things I've noticed in myself," he agrees, "is that in some of the dark days in government, you could hardly bear to listen to the radio or watch the telly. But I've noticed since being in opposition I probably listen to more current affairs than I ever did. My interest in politics is as alive as it's ever been."

Interest in Darling remains as alive as ever as well. In the mounting economic crisis, he is looking like one of the few politicians who might have a clue what to do, and the day after we meet I run into a Tory MP who says she can't wait to read his book. An awful lot of her colleagues, she adds, believe it's only thanks to Darling that the country isn't in even more of a mess.

"Yeah, but people are always nice to you when you leave," Darling says when I cite his widespread popularity. "It's like at a funeral. People are always terribly nice about the deceased even though they had plenty to say when you were alive."

In 2008 I asked him if leading Labour held any appeal to him, and he said no. "Well," he laughs, "I'm consistent. No, I'm not remotely interested in that, nothing's changed there. To be leader you have to want to do it, seven days a week, 24 hours a day, and I don't. I really don't. And on the way down from Edinburgh last week, when the phone started going about the leaks of my memoir, it brought back so many memories. And actually, I've enjoyed the last year. Because it's great when people don't phone you."

But he admits: "There are lots of times in the last year – or even now – when I would like to be involved and in government again. What is so frustrating is that we were actually coming out of recession when we left office."

In Darling's view, countries across Europe are making the same mistake as Britain's government by imagining that cuts will reduce their deficits. "That's true when the economy is working at full capacity. But it is not true when it isn't." There is still time, he says, for George Osborne to change course and invest public money to boost growth. But is that politically plausible? "There's lots of things you can do in politics if you execute the manoeuvre in an elegant enough manner."

Nonetheless, he acknowledges that the Tories have convinced many voters that the deficit is not a consequence of the recession, but of Labour's profligacy. This, he insists, is categorically untrue – "But you're right, it's a huge political problem for us. One of the challenges for both Eds is to cut through that, because I think the policy we have of a more measured approach to these things is perfectly credible, and independent commentators will say the same thing. There is every chance, the ground is there. But like everything else in politics, you have to take your moment."

Would Labour be doing better under David Miliband – the candidate Darling endorsed last year, and met in secret the previous year to discuss deposing their leader? "It's impossible to tell," is Darling's diplomatic reply. What about the claims made by Daily Telegraph bloggers and Tory cabinet ministers that Darling's book has damaged Labour's chance of re-election? "I certainly hope not. Would I write it in five years' time, just before the next election? No. That would be damaging. But my book's main purpose was to chronicle the economic and banking crisis."

He thinks Europe is on the brink of another spectacular crisis, because Greece cannot possibly deliver its austerity package, and Europe's leaders are incapable of taking unified action to prevent catastrophe. "I know the EU sufficiently well," he says wearily, "and I've been in enough meetings to know that nothing will happen until it looks like the thing's about to blow up." What the eurozone urgently needs, he says, is a plan – any plan.

"Markets are rational and irrational at the same time. They are irrational in saying they want to cut debt immediately and they want growth, because you can't get the two. Markets are now worried about growth. What's really spooking them at the moment is that in Europe they don't see a plan, they see the eurozone coming together, making an announcement, and a few weeks later it seems to be unravelling. That is what really throws people. What people are looking for is, what is your plan?"

As for himself, he says his only plan for now is to make no plans. He doesn't know if or when he would return to the frontbench, or what else he would do. For a long time it was always assumed that if anyone was going to follow Downing Street with a major international finance position, it would be Brown. No one predicted that it would be Darling – but when I ask if he'd be interested in such a post, his reply is interestingly evasive. "Well, there aren't many of them – so, um, you know," and he lets the sentence tail off into silence. But according to the Westminster rumour mill, Osborne is ready to nominate Darling to lead the IMF if its new incumbent, Christine Lagarde, is forced to stand down in the face of a corruption trial in France.

"It's news to me," Darling says. "No, there have been no discussions about it – and nor will there be."

Would such a post appeal? "Er, er, well, put it another way, I need something to keep my mind occupied. I'm young, and I'd like to practise what I preach and work well beyond 65. So what I'll do I don't know."

George Osborne Cheers Alistair Darling For Stabbing Ed Balls

It is not often that one sees a man enter the Chamber with a dagger protruding from the back of his neck. Ed Balls attempted to make light of this encumbrance, but without success.












The Tories loved reminding everyone that Mr Balls has been stabbed in broad daylight by a member of his own side. The attack was launched by the mild-mannered Alistair Darling, whose work as Labour’s last Chancellor of the Exchequer was persistently sabotaged by Mr Balls, and by Mr Balls’s patron, Gordon Brown.

Beware the vengeance of a mild-mannered man who has been treated abominably for years on end. Not since Sir Geoffrey Howe finished off Margaret Thatcher has a former Chancellor done such damage to a member of his own party as Mr Darling has done to Mr Balls.

George Osborne wasted no time, at Treasury Questions, in taking advantage of this opportunity. When Mr Balls called on the Chancellor to “repeat the bank bonus tax” imposed by Labour, Mr Osborne replied that he was not going to rely on the advice of Treasury officials, but on “the advice I’ve been given by the last Chancellor of the Exchequer”, someone Mr Balls was known to be “very close to”, namely Mr Darling, who had said the bank bonus tax would “have to be a one-off”.

This was followed by repeated references to Mr Darling’s newly published misery memoir, in which he describes how he was undermined by Mr Brown, and by the former Prime Minister’s brutal henchmen, notably Mr Balls.

Mr Osborne assured us that we are “going to be hearing a lot more” about this book. One rather doubts whether Mr Darling wanted the present Chancellor to plug his work with such enthusiasm, but it is too late now.

Mr Balls flushed, shook his head and ran his hand in a horizontal motion from side to side with the palm facing downwards: a gesture indicative of his conviction that the economy is flat-lining.

Labour MPs tried their hardest to embarrass Mr Osborne by pointing to the recent, disappointing growth figures: but the Chancellor just retaliated by pointing to Mr Darling’s memoirs.

Iain Wright (Lab, Hartlepool) attempted to change the subject by referring to Harold Macmillan as “the most successful Chancellor and Prime Minister that Eton has ever produced”, and by quoting Macmillan’s reply when asked what was most likely to blow a government off course: “Events, dear boy, events.”

Mr Osborne accused Mr Wright of “being rather unfair on Hugh Dalton who I think also went to Eton”. It is true that Dalton, who was a rather unappealing Labour Chancellor, went to Eton.

But Mr Osborne ought to have said Mr Wright was being far more unfair to William Gladstone, an Etonian whose achievements as Chancellor and Prime Minister make Macmillan’s look distinctly modest.

The trouble with Mr Osborne is that he is only really interested in the unhappy history of the period 2007-10, as related in Mr Darling’s memoir. By the time this is over we are all going to be bored rigid.

Darling: EU Must Get A Grip On Greece

The European Union must "get a grip" of Greece's economic woes before the contagion spreads, ex-chancellor Alistair Darling has said.

In a gloomy assessment of Europe's economic prospects, Mr Darling told Sky News the EU had to find a solution to the problems in Greece.

He warned a failure to tackle the problem would have a "damaging impact" on European banks and governments.

"That's why the EU has got to be realistic and at long last do something that actually fixes the problem and not this series of short-term fixes that keep failing, that keep coming back," he told Jeff Randall Live.

"This is what they've been doing now for the last 18 months and it doesn't work."

Mr Darling offered the pessimistic analysis of EU economies in an interview also critical of former prime ministers Tony Blair and Gordon Brown.











Economic troubles provoked clashes on the streets of Greece.

He was speaking in advance of the publication of Back From The Brink, a memoir of his time as chancellor during the financial crisis.

The former chancellor said he had to elaborate on his fraught relationships within the government in order to tell the story of the turmoil that engulfed the markets in 2008.

He said Mr Blair and Mr Brown had been allowed to assume too much control.

"In the 1990s, we were happy in some ways to let Tony and Gordon run the show - it wasn't quite a dictatorship - they made the changes Labour was desperately needing to make but hadn't done so.

"The problem was the decision-making became increasingly centralised," he said, adding policies on tuition fees and the economy would have benefited from wider debate.

"Collective discussion, the benefit of getting a combined wisdom, is I think something we didn't pay enough attention to," he added.











The ex-chancellor explained his criticism of Gordon Brown.

Asked if Ed Balls was among those who unleashed the "forces of hell" in negative briefings about him during the financial crisis, Mr Darling refused to attack his Labour colleague.

He said he backed the whole Labour front-bench, including the shadow chancellor.

Mr Darling said he acknowledged Labour did not always get it right in government and expressed regret more had not been done to fully implement welfare reform.

He cited the minimum wage as one of his party's greatest achievements.

An MP since 1987, Mr Darling was chancellor between 2007-2010 and also served as secretary of state for work and pensions, transport and trade and industry.

His outspoken remarks since leaving office are considered to be a contrast to the more low-key style he adopted in government.

RAF Flies £140m Unfrozen Cash Assets To Libya

The RAF has flown £140m of Libyan banknotes (280m Libyan dinars) to Libya after an assets freeze aimed at Col Muammar Gaddafi was lifted.









People rushed to get cash from their accounts after the Libyan banks reopened on Tuesday.

The cash, printed in the UK, is the first tranche of £950m that will be handed to Libya's Central Bank.

A Whitehall official said the money should be available for cash machines and banks in Libya very quickly.

Meanwhile, the BBC has learned that David Cameron set up a unit to block fuel supplies to Col Gaddafi's forces.

The secret "Libya oil cell" also ensured that petrol and diesel continued to get through to the rebels in the east, BBC deputy political editor James Landale said.

The Whitehall-based unit was made up of a handful of civil servants, ministers and military figures.

"If you didn't have the fuel, you couldn't win the war"

Whitehall source

It played a crucial role in starving the regime's war effort of fuel while making sure that the rebels could continue taking the fight to Gaddafi, Whitehall officials told our correspondent.


Our correspondent said the unit was the idea of International Development Minister Alan Duncan. He was unavailable for comment on Wednesday evening.

The former oil trader convinced the Mr Cameron in April that part of the solution to the conflict lay in oil, our correspondent said.

One Whitehall source said: "If you didn't have the fuel, you couldn't win the war. So our aim was to starve the west of fuel and make sure the rebels could keep going.

"Gaddafi had lots of crude but he couldn't refine it. So he had to rely on imported fuel. And we turned off that tap."

The unit was established in the Foreign Office and was initially headed by a senior admiral, and later by a senior government official.

The operation gathered intelligence about oil and fuel movements, and information was passed to the government and Nato.
'Britain's commitment'

The release of the Libyan currency came following a decision by the United Nations sanctions committee in New York.

The official said the cash delivery, worth $1.55bn, should make it possible to pay many public sector workers, including nurses, doctors, teachers and police officers, over the Eid holiday.

Many of those dependent on government salaries have not been paid for a number of months.

The money will also be used to provide aid for refugees displaced by the conflict and to pay for medicine and food supplies.

The funds were frozen in February when the uprising in Libya started.

The move comes on the eve of a major international conference on the future of Libya to be held in Paris on Thursday, chaired jointly by French President Nicolas Sarkozy and the UK prime minister.

UK Foreign Secretary William Hague said he was "delighted" the delivery to the Central Bank in Benghazi had been completed.

"Returning money to the Libyan people is part of our commitment to help the National Transitional Council rebuild Libya and help create a country where the legitimate needs and aspirations of the Libyan people can be met," said Mr Hague.

He added further deliveries of the remaining funds would be made shortly.
Ship held

Germany has also asked for agreement to release about 1bn euros (£900m) in seized assets, while France wants to unfreeze about 5bn euros (£4.4bn) to help pay for humanitarian aid and keep essential services going in Libya.

Last week, the UN agreed to a US request to unblock $1.5bn (£1bn) in frozen Libyan assets.

In March, a ship carrying Libyan currency worth £100m was impounded.

The Home Office said the ship was intercepted by UK authorities after heading back to British waters following an aborted attempt to dock at Libya's capital, Tripoli.

The money, which was printed in north-east England, was held at Harwich, Essex.

Bankers Attempt Last-Gasp Osborne Lobby Over Reform

George Osborne is meeting with Barclays chief executive Bob Diamond today as bankers launch a last gasp bid to delay banking reforms.












Barclays chief executive Bob Diamond believes banking reform could halt economic recovery.

It is expected that the independent banking commission chaired by Sir John Vickers, which is due to report within two weeks, will recommend that banks split their retail and investment arms to protect the public.

However Mr Diamond is arguing this will prevent banks from lending to small businesses and personal customers as they will have to hold more capital.

There is speculation that if the Vickers report is too strict then Barclays could respond by moving its investment banking arm, Barclays Capital, overseas.

Mr Diamond's attempts to dissuade Mr Osborne from implementing the rules in the short term follow warnings from several pro-business campaigners that major banking changes could throw the economic recovery off course.

Angela Knight, chief executive of the British Banking Association, said earlier this week that "now is not the time" for reforms.

Other heads of British banks are expected to meet with Mr Osborne over the coming days prior to the publication of the Vickers report on September 12th.

Banking reform could yet prove a contentious issue for the coalition, with business secretary Vince Cable accusing bankers of being "disingenuous in the extreme" earlier in the week.

He added: "The uncertainty and instability in the markets makes it all the more necessary that we press ahead and make our banks safe and reform them."

However Mr Osborne is thought to be more sympathetic to the banks position and appears to have an ally in the prime minister, David Cameron, who warned against reforms which put the economy at risk.

Ms Knight said Britain faced a "very difficult autumn" which would only be made worse by news of long-term reform of the banking sector.

"We have a high degree of uncertainty, market turbulence and lack of confidence that governments in other countries have got a sufficient grip on their economies," she commented.

"This is therefore the time to concentrate on economic recovery and paying back... the government and taxpayers.

"By all means think about new regulation but now is not the time to add that as an overlay with respect to costs, uncertainty or whether it is going to do anything beneficial anyway."

John Cridland, head of the Confederation of British Industry, cautioned that any major shake-up of banks at a time of economic uncertainty was "barking mad".

He told the Financial Times newspaper: "Taking action at this moment – this moment of growth peril, which weakens the ability of banks in Britain to provide the finance that businesses need to grow – is just to me barking mad.

"We don't want to force some of our remaining world class British companies to shift away from a focus on the UK because the rules have been set unilaterally in the UK.

"There's an own goal here about to be scored if we get this wrong."

MPs Lash Out After Council Tries To Scrap The Chequebook

MPs are looking to curb the influence of the Payments Council following the recent dispute over the replacement of cheques.












A Treasury select committee report out today called for the "unfettered power" of the banking industry body to be cut back and safeguards to be put in place to ensure banks could not abandon cheques by "stealth".

Andrew Tyrie, chairman of the committee, branded the organisation lacking in "effective public accountability" and called for greater consumer representation.

"Cheques have been saved, for the moment, but we need to remain vigilant. The incentives for the industry to get rid of cheques has not gone away. Neither have we," he said.

"That is why we are making far–reaching recommendations about the future of the Payments Council as well as to secure the future of cheques."

The Payments Council had planned to replace cheques by 2018, however it had to backtrack on the plans following a surge of public pressure amidst fears of the effect on the elderly and vulnerable for whom cheques are a preferred method of payment.

Under the recommendations of the Treasury committee the Payments Council could be brought formally within the system of financial regulation.

They could also be required to obtain a commitment from banks to give them advance sight of any material related to the future availability of cheques.

Banks themselves could be obligated to write to customers stating that cheques will continue to be in use for the foreseeable future in an attempt to allay customers' fears.

Mr Tyrie said: "Banks have given many customers the impression that the abolition of cheques was a foregone conclusion. This type of behaviour is unacceptable and cannot be allowed to continue."

The committee has also suggested that banks consider the reintroduction of the cheque guarantee card.

Michelle Mitchell, Age UK's charity director, welcomed the potential return of the cheque guarantee card and called it an opportunity for banks and building societies to "live up to their word" and prove the future of cheques is safe.

She added: "Whatever happens, the banking industry must be clear about what it is going to do to ensure that cheques remain a widely accepted, safe and accessible option for those who rely on them.

"Cheques and other payment systems are essential services upon which the public relies – just like the provision of water and electricity.

"Their future must not be left solely to the banking industry and its representative bodies to determine."

Chris Leslie, Labour's shadow Treasury minister, welcomed the "very sensible" report from the committee.

He continued: "If the government don’t act I will be seeking amendments to the forthcoming Financial Services Regulation Bill to make sure that the needs of consumers - for instance, retaining the convenience of the cheque - are strengthened."

Bankers Say Put Reforms On Hold Until Markets And Economy Recover

Director general of Confederation of British Industry says ploughing ahead with overhaul would be 'barking mad'.












Angela Knight, the banks' lobbyist, warns implementing reforms from ICB report could derail economic recovery.

The head of Britain's biggest lobby group will urge ministers to shelve plans for a major overhaul of banking on Tuesday, warning that they would be "barking mad" to plough ahead with it while the economy is still fragile.

Moving too quickly to separate the retail and investment arms of banks, under plans to be unveiled by the Independent Commission on Banking in two weeks, could threaten the economic recovery by stemming the flow of credit to businesses, John Cridland, director general of the Confederation of British Industry, has warned.

"Taking action at this moment – this moment of growth peril, which weakens the ability of banks in Britain to provide the finance that businesses need to grow – is just, to me, barking mad," Cridland told the Financial Times.

Cridland's intervention comes a day after similar warnings from Angela Knight, the head of the British Bankers' Association (BBA) and will add to the pressure on the chancellor to slow down the reforms.

Sir John Vickers is poised to publish his final report in a fortnight's time and is expected to recommend ringfencing banks' retail operations from their investment banking functions. George Osborne will then decide whether and at what pace to implement any reforms, which are highly sensitive in coalition politics with the Liberal Democrats pushing hard for radical change.

Previous reports have suggested that the chancellor is considering radical ring-fencing, but over a lengthy timetable of up to eight years, mindful of the immediate impact on the economy.

Any suggestion of a delay would be furiously opposed by the Lib Dems. Last night, an aide to the business secretary, Vince Cable, said: "We don't want to pre-empt Vickers but we don't see that tremors in the market are any excuse to delay. We need the framework in place as soon as possible so banks recover on the right trajectory. We recognise it can't be done overnight."

In an apparent dig at the Liberal Democrats who are insisting the reforms go ahead, Cridland expressed frustration that the issue was being sidetracked by politics. "This was all about safer banks for a safer economy. It wasn't about politics," he said. "And I get a sense that there's a little bit of 'we'll do this because of political reasons'.

"We don't want to force some of our remaining world class British companies to shift away from a focus on the UK because the rules have been set unilaterally in the UK," he said. "There's an own goal here about to be scored if we get this wrong."

Knight argued that any reforms to come out of the Commission should be put on hold until the economy has recovered and taxpayers have been repaid for bailing out the banks.

"We have a high degree of uncertainty, market turbulence and lack of confidence that governments in other countries have got a sufficient grip on their economies. We are in for a very difficult autumn," she said.

"This is, therefore, the time to concentrate on economic recovery and paying back... the government and taxpayers. By all means think about new regulation but now is not the time to add that as an overlay with respect to costs, uncertainty or whether it is going to do anything beneficial anyway."

The Treasury said in a statement: "The government set up the ICB to ask the difficult questions that weren't asked before the crisis and this is exactly what the commission is doing. We look forward to receiving the final report on 12 September."

Chancellor Tells World Leaders To 'Show Courage'

George Osborne today called on global leaders to show "courage" and work together to fend off another financial crisis and keep the recovery on track.


















The Chancellor warned the "future prosperity of millions" was at stake without decisive action to tackle problems in the world economy.

He joined finance ministers from Singapore, Canada, South Africa and Australia in demanding reforms in a range of areas to go along with tough deficit-cutting measures as the head of the World Bank warned global stock markets were entering a "new danger zone".

Robert Zoellick said the response by leaders in America and Europe to economic challenges in recent weeks had led many in the markets to "lose confidence in economic leadership of some of the key countries".

That was echoed by Mr Osborne and the other finance ministers, who wrote today: "We all knew the recovery from the global financial crisis would be prolonged. However, the more serious malaise today is the lack of confidence in efforts by governments to address the structural problems that underpin weak growth, high unemployment and unsustainable fiscal balance sheets."

Calling for a "new global response", they outlined reforms of regulation, banks, closer eurozone integration and a push for trade to go alongside fiscal discipline.

In an attempt to set the agenda before major meetings in the autumn, they wrote in the Financial Times: "The biggest barriers are political, not economic, so what is needed is political leadership and courage." They added: "We have more than our credibility at stake. We have the future prosperity of millions of fellow citizens to safeguard."

The intervention follows a turbulent week on the stock markets after concerns about debt in the eurozone and the downgrading of the US economy.

French president Nicolas Sarkozy and German chancellor Angela Merkel are meeting tomorrow to try to thrash out a plan to tackle the crisis on the Continent.

It comes amid further concerns about the British economy and a Coalition row over scrapping the 50p top rate of income tax. A Chartered Institute of Personnel Development and KPMG survey of 1,000 employers found unemployment is set to rise this year.

Meanwhile senior Liberal Democrats are pushing the Government to consider a tax on the richest homeowners as a trade-off for scrapping the 50p rate of income tax.

Mr Osborne gave his strongest hint yet that the top rate will be abolished, saying it was "very uncompetitive". But scrapping it would lead to demands from the Lib-Dems for the richest to be taxed in another way - possibly through a levy on homes.

Expenses, 'Phone Hacking, Riots ''All The Same Problem''

The Labour leader Ed Miliband has said the underlying causes of the recent riots are the same ones that saw MPs fiddling their expenses, bankers sending the UK's finances into freefall while pocketing huge bonuses, and newspapers hacking mobile 'phone voice mails of murder victims and others.










Essentially, he said, all the perpetrators deliberately turned a blind eye to what was right and what was wrong and chose to think only of their own needs. And this 'me first' approach was a major flaw in the thinking of too many people that really needed to be sorted out.

"There is an issue which went to all our souls," Miliband said on BBC radio, "this is an issue not just about the responsibility and irresponsibility we saw on the streets of Tottenham. It's about irresponsibility, wherever we find it in our society.

"We've seen in the past few years MPs' expenses, what happened in the banks, what happened with 'phone hacking."

He went on: "It's right the courts are handing down exemplary sentences because there needs to be a signal sent that we won't tolerate these things in our society, that it's not okay to do these things.

"We have got to ask why do we have people in our society who feel that the way they can get on and the right thing to do is go and nick the telly, engage in the kind of looting we saw. We have got to avoid simplistic answers. There's a debate some people are starting: is it culture, is it poverty and lack of opportunity? It's probably both."

When it was pointed out that the children rioting were 'Blair's children' in that they all grew up under a Labour administration that was in power for 13 years, Miliband said: "I deeply regret that inequality wasn't reduced under the last Labour government. But we did great things to tackle inequality in our society."

Pointedly, he added: "We did better at rebuilding the fabric of our country than the ethic of our country."

Miliband also repeated his request for a public inquiry into the riots which did not include "a bunch of academics in Whitehall ... but the good, decent people of Tottenham".

"I really hope the Prime Minister in the next couple of days, before everything dissipates and the dust settles, agrees to that public inquiry," he said.