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.

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.

World Bank Warns Of 'Danger Zone' As Global Stock Markets Are Sent Tumbling

UK shares suffered their biggest fall in nearly three years today amid fears a global recession.

It came amid a warning from the World Bank of a 'danger zone' and last night's backfired attempt by the Fed in the U.S. to prop up confidence.

All leading global stock markets indices plummeted with the FTSE 100 down 4.7 per cent - a colossal slump of 246.80 points to 5,041.61, its biggest points fall since November 2008.

The fresh sell-off was primarily sparked by America's announcement last night of a £250billion rescue operation to prop up its feeble economy.













Taking stock: A Barclays Capital trader holds his head while working on the trading floor at the New York Stock Exchange, which has seen huge amounts wiped off the value of firms.

The Dow Jones slumped on opening and was down 3.4 per cent by the time of the close in Europe. It adds to a fall of 2.5 per cent on Wall Street yesterday. Germany's DAX closed down 5 per cent.

Fresh evidence also emerged overnight of a slowdown in China and a warning from the World Bank further added to the panic in equity markets.

President Robert Zoellick said the world was 'in a danger zone'.

'Europe, Japan, and the United States must act to address their big economic problems before they become bigger problems for the rest of the world,' he said at the annual meeting of the World Bank and International Monetary Fund. 'Not to do so is irresponsible.'

'Some developed country officials sound like their woes are just their business. But my confidence in that belief is being eroded daily by the steady drip of difficult economic news. The world is in a danger zone.'

Banks were among the biggest losers, now the norm in sell-offs, with Lloyds Banking Group shares down more than 10 per cent at 32.51p and Barclays off 9.4 per cent at 138.85p.

Miners also fell victim, due to the expected slump in demand for commodities, with Vedanta Resources shares plunging 13.3 per cent and Antofagasta down 12.7 per cent.

The huge threat facing the British and global financial system was laid bare last night as the U.S. took unprecedented emergency steps to aid the world’s largest economy.

Frightening evidence that the crisis in euroland is spinning out of control also emerged as the International Monetary Fund revealed that a £263billion black hole has opened up in its banks.

The turmoil on both sides of the Atlantic will spark fears that the world is heading for its worst economic crisis since the collapse of Lehman Brothers three years ago.

The Federal Reserve, America’s central bank, launched a £250billion operation to lower borrowing costs for businesses and for consumers in the U.S., selling its shorter-term securities to buy longer-term holdings.

Its move came amid escalating fears over the health of its banking system.

A trio of the country’s biggest banks – Citigroup, Bank of America and Wells Fargo – had their credit ratings downgraded by leading rating agency Moody’s. The UK is in danger of being caught in a vice caused by the problems on both sides of the Atlantic as the eurozone and the U.S. are our biggest trading partners.

The Fed is already engaged in enormous efforts to stimulate U.S. growth and has held short-term interest rates near zero since December 2008.






04.35pm, 22 Sep 2011 FTSE 100 (UKX)
5,041.61p -246.80p -4.67%

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Prices delayed by 15 minutes.


It is under pressure to revive an economy that has limped along for more than two years since the recession officially ended.

As well as the rescue – the first of its type for 50 years when a much smaller exercise was undertaken – the Fed issued a grave warning about the ‘significant downward pressure on global markets’.


















Fury: People from all over the U.S. have gathered on Wall Street in New York to voice their frustration with the economy and banks.

It said this has been caused by the failure of the euro area politicians to take tough decisions to resolve the turmoil in the single currency area.

The Washington-based IMF echoed the Fed’s swingeing cricitism of Europe’s leaders for failing to rescue their banks and restore stability.

It said that if they do not do so quickly, lending across the region would dry up, accelerating the downward spiral which has brought growth to a shuddering and dangerous halt.

The IMF’s top financial stability official, Jose Vinals, said: ‘Sovereign [debt] risks have spilled over to the region’s banking system.

‘This has put funding strains on many banks in the euro area and has depressed their value.’ Since the euroland crisis flared up in Greece last year an astonishing 40 per cent has been wiped off the market value of Europe’s banks.

Mr Vinals called for an immediate bail-out of the banks across Europe even if this meant nationalising them.













Eurozone: Protesters hurl rocks at police during a violent demonstration against austerity in Greece, a financial crisis which continues to depress markets.

‘The worst thing that you can have are banks that cannot get funding,’ he warned.

Mr Vinals blamed inaction on ‘weak politics’. Failure of leadership on both sides of the Atlantic has led financial markets ‘to question their resolve’.

The IMF estimated the direct exposure of the banks to the struggling PIIGS – Portugal, Italy, Ireland, Greece and Spain – to be 200billion euros (£175billion). But when the banks’ lending to each other is taken into account the number climbs to 300billion euros (£263billion).

Britain moved to bail out its banks three years ago in the wake of the Lehman collapse when the government took big stakes in Royal Bank of Scotland and Lloyds Banking Group and effectively nationalised Bradford & Bingley.

The IMF accused European leaders – German chancellor Angela Merkel and French president Nicholas Sarkozy – of failing to address problems full on.

The euro area needed to act ‘decisively and expeditiously’ to resolve the sovereign risks to the world economy and the spill over to the weak banks.

If there is to be a recovery in Europe then the ailing banks ‘need to have sufficient muscle to support economic recovery through lending’, the IMF said.

A leading IMF official acknowledged that in Britain the Project Merlin agreement between the banks and the Government meant that lending was taking place.

But the official made it clear that the targets need to be revisited on a regular basis and that lending to small and medium sized enterprises needs attention.

RIGHTMINDS

RUTH SUNDERLAND: '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.'

Meanwhile, disappointing news about China's economic prospects emerged overnight.

A key survey by HSBC revealed factory output in China fell for a third month running in September, sparking fears of a slowdown in the world's second biggest economy.

UK Politics: Recovery Postponed

Dismal growth prospects have sharply redrawn Britain’s political landscape, write George Parker and Elizabeth Rigby.











Political cover: David Cameron, right, seen with Nick Clegg, has come to realise how useful his junior coalition partner is in protecting him from his own party's ranks - not least over issues such as Europe, tax and health.

This week Britain’s cabinet was confronted with a bleak political picture. In cold and precise terms, George Osborne, chancellor of the exchequer, told colleagues in Downing Street on Tuesday that UK growth prospects were deteriorating and did not look like they were coming back soon. The significance of his analysis is only slowly being grasped by Britain’s political classes: everything has changed.

“The reality we face is stark,” confirmed Nick Clegg, deputy prime minister, in a speech on Wednesday that reflected the growing sense of foreboding around the coffin-shaped cabinet table. “There is now little margin for error,” he added. One minister confirmed that Britain was facing “a terrible situation”; another said it felt like 2008 when the financial crisis hit.

Much has changed during Britain’s long and dismal summer. Mr Osborne confirmed to ministerial colleagues that the eurozone crisis, shrinking export markets, the US slowdown, high inflation and rising commodity prices had all taken their toll, draining demand from an economy already sapped by the biggest fiscal consolidation of any major economy.

The riots that ravaged British cities last month may have been little more than mass copycat looting, but images of burning buildings and police struggling to regain control of the streets were reminiscent of the conflicts that scarred cities across the country during the brutal recession of the 1980s.

As Britain’s politicians prepare for the annual party conference season, the implications of economic slowdown – and the possibility of another recession – are slowly becoming clearer. The economy will dominate debate and shape strategy; a new phase in politics is opening up.

To understand the scale of the shift, consider the outlook at the start of the year. The Treasury was drawing up plans to start selling its stakes in banks, nationalised during the crisis, in 2012 in a sign of confidence returning to the City of London.

Government advisers talked confidently of next year’s Olympic Games in London as “a pivotal moment” – a shining light on the horizon – when austerity Britain would regain its verve. (Queen Elizabeth’s diamond jubilee would further lift the spirits.) All parties expected to fight the 2015 general election against a backdrop of plenty that would have followed a few years of tough-but-necessary choices.

Now the bank sales have been shelved until after the election and few in the cabinet mention shining lights. Party strategists have suddenly stopped talking about “spending the proceeds of growth” in the second half of the parliament.

Of course, the picture could change dramatically again, but for now Mr Osborne’s grand political plan – two years of pain, three years of recovery – seems in doubt. Ministers admit that come the election, the economy may still be mired in low growth and few now expect the independent Office for Budget Responsibility’s forecasts to be achieved. As recently as March, the OBR forecast growth of 1.7 per cent this year, 2.5 per cent in 2012 and 2.9 per cent in the two years before the election. Current consensus forecasts see 1.3 per cent growth this year and 2 per cent next year.

The strains were showing in the Conservative-Liberal Democrat coalition even before the economic outlook worsened; now the two sides will have to march together through what could be almost four years of economic hardship, punctuated by public sector strikes over the cuts.

Pressure is also mounting on David Cameron, prime minister, to do something to cheer the rightwing of his Conservative party, which has applauded the government’s tough economic message but feels badly let down on other issues, including Europe, tax, schools and immigration.

Tim Montgomerie, editor of ConservativeHome, an activists’ website, says Mr Cameron has been able to contain this unrest by pointing to the coalition’s success in sticking to its central mission: “sorting out the mess” in the public finances left by his Labour predecessor Gordon Brown. “That could change if the economy goes wrong and the coalition gets the blame,” Mr Montgomerie says.

Mr Cameron is drawing up a growth strategy built around delivering big infrastructure projects, cutting red tape and reforming planning laws. But he is under growing pressure from some in his party to emulate Margaret Thatcher and administer the type of radical economic shock therapy that she delivered as prime minister in the 1980s. Suggestions include cutting the 50p top rate of tax, scrapping European Union labour laws, reintroducing selective grammar schools and engaging in ambitious supply side reforms.

Tory MPs have been scrambling to put their advice to Mr Cameron down in writing before the conference season. David Davis, who ran against the prime minister for the party leadership, has co-edited a book – The Future of Conservatism – claiming that Tory ideals have been “significantly diluted” by what he once dubbed the “Brokeback coalition”.

Priti Patel, one of five new Tory MPs to contribute to After the Coalition, another book, says: “Being in coalition should not be an excuse for holding back on many critical issues such as sentencing, immigration and Europe. David Cameron is in charge and with a Conservative majority in cabinet there is no reason why the status quo should become the default option.”

. . .

The grumpy mood on the Conservative benches is reinforced by a suspicion that Mr Cameron – who describes himself as a “liberal conservative” – is using the Liberal Democrats as cover for refusing to deliver a more rightwing agenda. Indeed one Tory official admitted the coalition had been “brilliant for us” because it allowed Mr Cameron to stick to the centre ground.

The prime minister is also blamed by some Tory MPs for a big review of parliamentary constituency boundaries – almost everyone is affected; some will lose their seats altogether – while others complain that the well-heeled Mr Cameron is remote and disconnected from the grassroots. “We’ve been taken over by a Bullingdon Club clique,” complained one senior Tory MP, referring to Mr Cameron’s past membership of a plummy-yet-boorish Oxford university drinking club. “It’s almost Edwardian.”

Mr Cameron’s team rejects this as an inaccurate caricature, pointing out that the prime minister has been dining with MPs and visiting the House of Commons tea room regularly – a classic manoeuvre to try to quell unrest in the ranks. But he knows that the ongoing economic gloom – manifested in rising unemployment and falling living standards – will only make party management harder.

Nevertheless, Mr Cameron appears unperturbed for now. That is in part because he believes he can win the 2015 election even if the economy is in the doldrums – provided he can blame external factors and claim that he had taken the tough action on the deficit to ensure things were not even worse. Clinging to the mantle of “economic competence” has become yet more essential to the prime minister.

Under Ed Miliband, the Labour opposition has so far failed to regain its reputation for economic credibility, which suffered under what Alistair Darling – the party’s last chancellor – has admitted was a period of “chaos and crisis” during the last years of Mr Brown’s government.

One coalition minister says: “All our feedback tells us that people don’t like what we are doing but they attach no credibility to the alternative. I think people have made up their mind about the Labour leadership.”

Mr Miliband must give a strong performance at his own party conference to reassure the doubters, fleshing out an alternative economic Plan B that does not simply remind voters that it was Labour which presided over the surge in borrowing in the first place.

Shaping Labour’s economic strategy is Ed Balls, a former Brown lieutenant, who has long argued that the coalition’s rapid deficit-reduction plan would hobble the economy. He talks of a “growth crisis” and told the BBC this week: “The evidence is clear that I was right and they were wrong.” But being right may not be enough.

Lord Mandelson, former Labour business secretary, says his party must recognise “the economy will not be growing quickly and real incomes will not be rising” at the next election. Writing in a new pamphlet called The Purple Book, he argues Labour must develop policies for tough times, including plans to modernise public services, to keep taxes low and to keep the economy competitive.

. . .

For Mr Clegg the economic downturn presents a major political challenge as he prepares for his Lib Dem party conference in Birmingham next week. Members of his centrist party have been prepared to go along with the coalition’s tough fiscal plan on the understanding that things would be better by 2015. Now what?

The deputy prime minister is determined to stay the course; he believes there is a big political prize in securing a record of economic competence in government. But Lib Dem strategists admit they were betting on fighting the next election in good times and are having to rethink.

“The Tories can get away with an election in bad times, because they can say they are still trying to clear up the mess left by the socialists,” says one party strategist. “It’s harder for the Lib Dems, we are a party which thrives on optimism – that may be in short supply.”

To raise morale, Mr Clegg has sharpened his party’s identity in the coalition, fighting to water down “Tory” health reforms, opposing the removal of the 50p tax rate or the introduction of private profit into the schools system. Like Mr Osborne, he needs to show that the coalition has a strategy for growth to counter the downturn.

But Mr Clegg has always warned his party not to think of itself as an “internal opposition” in government. His allies say he needed to “turn up the dial” in differentiating himself and his party from the Tories following dismal local election results – and defeat in a referendum on electoral reform, a core Lib Dem issue – in May. But, they predict, he may turn the dial down again once the conference season is out of the way. “The next year is going to be very tough,” says one ally. “We’ll have to knuckle down and get on with the job.”

Europe: Sceptical genies brood in the bottle

In Brussels every crisis is an opportunity to further European integration. But at Westminster, particularly among most MPs in the Conservative party, the eurozone crisis offers a chance to move in the other direction. For them the current euro troubles are a rare opportunity to take Britain further from the centre of a European project they detest.

For David Cameron, prime minister, turmoil in the eurozone is thus not only an economic danger, but a political one too. Once the Tories were split on Europe; now almost the whole party is eurosceptic. (This week at least 100 MPs discussed a new “moderate” agenda to reclaim powers from Brussels.)

Mr Cameron’s problem is managing this visceral dislike of Europe. “I was told never to seek a meeting with David to discuss Europe,” says one Tory minister. “He thinks that even wanting to talk about Europe is swivel-eyed.”

The prime minister – who describes himself as “a very practical eurosceptic” – fears that when the Tory party talks about Europe, it starts to sound like a strange cult, out of touch with voters’ real concerns such as health and crime.

Tory MPs see the negotiation of a possible new European Union treaty to reinforce eurozone integration as their moment. They want Britain to use its veto to take back powers from Brussels on issues such as criminal justice, employment policy or immigration. Their hopes were raised last week when George Osborne, chancellor, said such a treaty was “on the cards” to pursue the “the remorseless logic” of monetary union: closer fiscal union. He knows that the tighter the core of the EU, the less likely Britain would ever be part of it.

Mr Cameron hopes that the crisis can be addressed without treaty change – a view shared by Herman Van Rompuy, EU president.

Tory demands for the repatriation of powers would strain coalition relations with the pro-European Liberal Democrats, who say Britain should be helping to solve the eurozone crisis.

So far Mr Cameron has managed to hold his party and the coalition on Europe. But many Tory colleagues believe he is hiding behind the Lib Dems as an excuse for not delivering the European policy they demand.

UK Lags Behind In Child-Parent Wellbeing, Says Unicef

Children and parents in two contrasting European countries, Sweden and Spain, have significantly higher levels of wellbeing than those in a third, the United Kingdom, according to a survey and research by Unicef, the United Nations Children’s Fund.


















The survey examined attitudes towards materialism and inequality and found that parents and children had markedly different attitudes towards material possessions.

It was carried out among some 250 children, ranging in age from eight to 13, from all social backgrounds in the three countries. The findings were further discussed in three steering groups, one each in England, Spain and Sweden, of 14-year-olds. Twenty four families in the three countries were also observed and filmed.

“The message from them all was simple, clear and unanimous,” according to the Unicef report, “their wellbeing centres on time with a happy, stable family, having good friends and plenty of things to do, especially outdoors.”

Given the links, in terms of history, cultural and social policy thinking, between Ireland and the UK, the survey is likely to be of interest in Ireland, in particular to social workers, childcare specialists and policy analysts.

“Family life in the three countries was strikingly different,” says the report. It identified pressure on parental time in the UK, linked to long hours and both parents working outside the home, as having an impact on children, with parents trying to “make up” by buying things for their children.

“In the UK homes, we found parents struggling to give children the time they clearly want to spend with them whilst in Spain and Sweden family time appeared to be woven into the fabric of everyday life. We also noticed that the roles played by mothers, fathers and children within the family and the rules which governed family life were much more clearly defined in Spain and Sweden than in the UK.

“Moreover by the time many British children had reached secondary school, their participation in active and creative pursuits – pursuits that children said made them happy – had in fact dwindled, whilst this occurred less in other countries . . .

“Behind the statistics, we found British families struggling, pushed to find the time their children want, something exacerbated by the uncertainty about the rules and roles operating within the family household. And we found less participation in outdoor and creative activities amongst older and more deprived children.”

On materialism, the survey found that British children and parents both had problems.

For the majority of eight- to 13-year-olds in all three countries, “new toys, fashion items and gadgets were not central to their wellbeing”.

“Rather than wanting to acquire things for their own sake, material objects and consumer goods tended to fulfil a range of purposes in children’s lives: utilitarian, symbolic and social,” says the report.

“However, whilst most children agreed that family time is more important than consumer goods, we observed within UK homes a compulsion on the part of some parents to continually buy new things both for themselves and their children . . .

“We also noticed that UK parents were often buying their children status brands believing that they were protecting them from the kind of bullying they experienced in their own childhood.

“This compulsive acquisition and protective, symbolic brand purchase was largely absent in Spain and Sweden where parents were clearly under much less pressure to consume and displayed greater resilience.”

On inequality, in the UK this tended to be defined in terms of money and material possessions.

“Whilst the links between brands and inequality created tensions and anxieties for children in all three countries to some extent, these feelings were only shared by UK parents. Swedish and Spanish parents seemed not to belong to a “consumer generation” in the same way.

“Deprivation for Swedish parents was understood as living in an area where personal safety was threatened, whilst for Spanish mothers not being able to spend time with your children was seen to confer disadvantage relative to others.

“In the UK, inequality was also seen in access to outdoor, sporting and creative activities, with poorer children spending more sedentary time in front of screens whilst the more affluent had access to a wide range of sports and other pursuits.”

Children’s Well-being in the UK, Sweden and Spain: the Role of Inequality and Materialism (Unicef; June 2011) is a qualitative study and may be read online in full at unicef.org.uk/Latest/News/

Cameron Rules Out Europe Referendum

David Cameron has insisted Britain must make Europe "work for us" as he again ruled out holding an "in out" referendum.








During Prime Minister's questions he was urged to listen to the calls of Conservative eurosceptics who want a swift vote on the UK's relationship with the EU.

However Mr Cameron, who is meeting president of the European Council Herman Van Rompuy on Wednesday, insisted there is "no case" for a vote.

Mr Cameron said: "I want us to be influential in Europe about the things that matter to our national interest - promoting the single market, pushing forward for growth, making sure we get lower energy prices.

"Those are things we will be fighting for but I don't see the case for an in out referendum on Europe. We are in Europe, we have got to make it work for us."

It comes as a group made up from around 80 new intake Conservative MPs plans to press the Government for significant changes in Britain's role in Europe.

Tory MP George Eustice, one of the group's conveners, insisted the initial aim was for reforms rather than a referendum. He said: "The aim of this new group is to promote debate about creating a new relationship with the EU and reversing the process of EU integration."

The group will work closely with think-tank Open Europe and could eventually expand to take in Labour eurosceptics and possibly some Liberal Democrats.

UK Independence Party leader Nigel Farage said: "The Prime Minster has said today that he didn't see the case for an in/out referendum on Europe. 'We are in Europe', he told us and 'we have got to make it work for us'.

"Well it is obvious that the EU is not working for us, and hasn't worked for us. So then what does Mr Cameron propose? By ruling out a referendum he leaves himself naked in the negotiations. Our EU colleagues must be laughing at his naivety."

Cameron Still Lacks A Foreign Policy Vision

What kind of a power do we want to be? How do we achieve that ambition? Cameron is unsure.












David Cameron greets troops after making a speech to British and American troops at Camp Leatherneck military base on July 4, 2011 in Helmand Province, Afghanistan.

Nato's mission in Libya looks like a foreign policy success for David Cameron, but that is not the same thing as having a successful foreign policy.

First, the obvious caveats: it is early days; the battle is not over, let alone the war. There are easily enough military and diplomatic traps ahead for the Libyan intervention to become a failure. The prime minister, the deputy prime minister, the foreign secretary and the defence secretary have all said as much. But for now, the politics of the situation are favouring Cameron. He took a big decision under considerable pressure and, after some nerve-wracking months, it appears to have paid off. "He definitely leapt before he looked," was how one senior Ministry of Defence official put it too me early on in the campaign. (The same source also said of the anti-Gaddafi rebels "the only good fighters among them are the al-Qaeda ones", a slightly wild allegation which should nonetheless be reason enough to put blind optimism for the future on hold.)

Libyans will decide whether they are better off in the long run for the UK's military partisanship in their insurrection-cum-civil war. The point is that, in the eyes of the British public, Cameron has effectively led a short war. There are usually political dividends to be drawn from that position.

But I suspect they will be limited in this case because, as with so much of Cameron's leadership, the good news story doesn't slot into a wider strategic narrative. It is worth remembering that the Conservatives came into power signalling reluctance to reshape the world - a la Blair - by military excursion. The new doctrine, as spelled out by William Hague in a series of speeches in July 2010, was a kind of bilateral mercantilism. The UK would continue to promote freedom and democracy around the globe, the foreign secretary said, but the main tool would be aggressive pursuit of trade interests. Overseas embassies would be reconfigured as pushy chambers of commerce.

Barely weeks before taking action in Libya, Cameron declared: "I am not a naive neocon who thinks you can drop democracy out of an aeroplane at 40,000ft." The fact that Cameron then decided to use British military assets against Gaddafi doesn't signal some visionary conversion to fanatical interventionism. Libya might be a one-off; Gaddafi might just have been low-hanging despotic fruit.

To get the maximum political advantage from the intervention, Cameron has to frame the episode in terms of his vision of Britain's role in the world - and it isn't clear that he has one. The project of expanding our national influence by trade is looking trickier as the global economy falters. As an ambition it is of a pair with George Osborne's hope of rebalancing the economy and driving growth through exports - which relies on a level of overseas demand for UK goods that has not yet materialised.

A big gap in Cameron's world view (at least the publicly known portion of it) is his sense of how Britain's position in the European Union will evolve as the single currency lurches ever onward in financial and institutional crisis. As I mentioned in my column this week, this omission is stirring dissent in the party. A lot of Tories see the eurozone crisis as an opportunity to start a wholesale renegotiation of Britain's EU deal, but there isn't much appetite for that at the top of the party. (This is partly because the leadership's view of all matters EU is coloured by their "modernising" crusade in opposition, so there is an association between public expressions of fierce euroscepticism and unelectability. Then, of course, there is the problem of the stubbornly Europhile Lib Dems.)

The Arab Spring; global economic turbulence; structural crisis at the heart of the European Union - three giant themes that raise profound questions about Britain's position in the world. What kind of a power do we want to be? How do we achieve that ambition? I don't get the impression that Cameron is any closer to having persuasive answers to those questions than he was when he moved into Downing Street last year.

The Law Is 'Avin A Laugh – But The Joke Is On Britain

Europe's stand on human rights is too often a kick in the gut for the victims of crime.












Justice for all? Philip Lawrence (left) and his killer, Learco Chindamo.

'They drive me mad, too.” That’s what the Prime Minister told me in a more innocent time, before the riots. Back in April, I was sitting in Number 10, reading him a list of the human rights abuses that drive the public to despair. I don’t mean abuses under the Human Rights Act 1998. I mean abuses of the rights of humans whose children have been mown down by foreign drivers with no licence, humans whose husbands have been stabbed to death. Humans still astounded by grief who have to attend a British court and hear a judge tell them that the conscienceless wretch who extinguished their happiness cannot be deported post haste or hurled, preferably, over the white cliffs of Dover. No, the wretch must be allowed to remain in our country because they have the right to “a family life”.

I keep a shoebox stuffed with newspaper cuttings about such cases. They bring to mind the Ricky Gervais catchphrase, “Are you ’avin a laugh?” On Saturday, I added another surreal snippet to the pile. The Court of Appeal in its wisdom had just torn up powers that allowed judges to ban convicted paedophiles from unfettered access to their children. Apparently, the paedophile’s right to a family life must be taken into account, even if the kids in question fear Dad’s tread at the bedroom door. Are their honours ’avin a laugh?

Our judges’ ever-widening definition of what constitutes “family life” almost dislocated my jaw recently when a Bolivian immigrant escaped deportation because he owned a pet cat with his girlfriend. We cannot know the name of the moggy, let alone the Bolivian, but Judge Judith Gleeson joked that the cat “need no longer fear having to adapt to Bolivian mice”. Was she ’avin a laugh?

Here’s another. In a landmark ruling, Strasbourg judges decided that two Somali men, who had abused our hospitality by robbery, drug dealing and threats to kill, could not be deported because there was a possibility they might face “ill treatment” at home. Remember the case of Mustafa Jama who was was convicted for his part, along with two other Somalians, in the murder of WPC Sharon Beshenivsky in November 2005? Jama, who had previous convictions for robbery and burglary, had been considered for deportation shortly before that tragic shooting, but officials decided it was “too dangerous” for him to return to Somalia. After the cold-blooded killing of Sharon – mother to Samuel, Lydia and Paul – in a Bradford travel agency, Jama evaded capture for four years by fleeing to… guess where? Yup, Somalia. The very place his lawyers had claimed it was unsafe for him to return to. Were they ’avin a laugh? Sharon’s widower, Paul, certainly wasn’t. He said his wife would never have been murdered if “do-gooders” hadn’t kept her killer in Britain.

Why are we powerless to send these frightening, violent individuals back to where they came from? Because, according to the European Court, it’s too frightening and violent. Anything I’m missing here, chaps? Are our learned friends in Strasbourg ’avin a laugh? If so, there is no longer a shred of doubt that the joke is on the British people. A nation that carried the torch of liberty with Magna Carta, parliamentary sovereignty, judicial independence, Press freedom, habeas corpus and trial by jury needs no lessons in justice from its pious neighbours, who loaded Jews, gipsies and homosexuals into cattle trucks. The waffly preamble to the European Convention on Human Rights speaks of “countries which have a common heritage of political traditions, ideas, freedom and the rule of law”. Well, we don’t have a common heritage or laws. As the distinguished QC Geoffrey Robertson has pointed out, torture was a prescribed part of the Continental legal process for centuries after it was abolished in England in 1641. It was Great Britain, not Europe, that taught the world how to right human wrongs.

The riots have made scrapping the Human Rights Act more urgent. More than 150 people born abroad have been arrested so far. Immigration minister Damian Green said: “We strongly believe that foreign national lawbreakers should be removed from the UK at the earliest opportunity.” Good luck with that, Damian. You do realise the poor darlings can’t possibly leave the country, don’t you? They’ve got pussy cats to look after and drug addicts to supply.

While judges increasingly warp Article 8 of the Convention in favour of villains, why do they never seem to consider the right to a family life of people like Frances Lawrence and the four children she had with headmaster Philip? In 2007, the Home Office failed to secure the deportation of Learco Chindamo, Mr Lawrence’s murderer. An Asylum and Immigration Tribunal insisted that to deport the Italian-Filipino would breach his human rights. Like Paul Beshenivsky, Frances Lawrence was aghast to discover that the needs of her spouse’s killer outweighed those of her bereft family.

Chindamo, who was cleared in court yesterday of a street robbery, is a cocky youth who, like so many, had been emboldened by the knowledge that wrongs, however grievous, will never prevent him having human rights on his side. He is one of thousands of foreign-born criminals who have humiliated the Home Office and who have shown with brutal clarity that the law of the land is not ours, for what Briton in their right mind would put the domestic comfort of a murderer before the safety of their fellow citizens?

This is what Cameron was getting at in his forceful speech following the riots. He noted how the “greed and thuggery” could not be separated from the “growing sense that individual rights come before anything else… I am determined we get a grip on the twisting and misrepresenting of human rights.”

Three cheers for those noble words, Prime Minister, but what the hell are you going to DO about it? In Opposition, Cameron pledged to scrap the Human Rights Act “so we can throw foreign terrorists and criminals out of our country”. When I asked him about it in April, he looked exasperated. “Obviously, this is something which is more difficult in Coalition. I won’t hide that from you. The Liberal Democrats have a different view on the Human Rights Act.” He assured me the Government was setting up a commission to look into a British Bill of Rights. What he omitted to tell me was that Nick Clegg would be in charge of it. I’m sorry, but allowing the Deputy Prime Minister to head a body to scrap the Human Rights Act is like appointing a vegan to the Texas Beef Council.

Tensions in the Coalition are said to be running high with senior Lib Dems warning the PM not to “water down” Britain’s commitment to human rights. Good. Let battle commence. Some things are worth fighting for. As a sop to his Coalition partners, Cameron permitted a referendum on the AV voting system, a notion commanding such widespread support that only Eddie Izzard and five blind jugglers in Camden voted for it. So why can’t we have a referendum on something the public feels passionate about? Like a British Bill of Rights.

The PM could do himself and the country a power of good by jettisoning a law that makes a mockery of the very justice it is intended to dispense. To stiffen his resolve, here are some sage words from a predecessor in Number 10. “We are with Europe but not of it; we are linked but not compromised. We are associated but not absorbed. If Britain must choose between Europe and the open sea, she must always choose the open sea.”

Winston Churchill’s words are as relevant as they were on May 11, 1953. The time for Strasbourg ’avin a laugh at our expense must end. The case for a British Bill of Rights is overwhelming. Human rights can be wrongs.

When forgiveness goes a step too far

All together now, “Serm taymes it’s hurd to bay a wurman.” Tammy Wynette’s ballad of female loyalty, Stand By Your Man, was much mocked by feminists. Some thought Tammy was really singing, “Stabbed By Your Man” or the equally catchy “Let Me Be Your Doormat, You Cheating Bastard.” Wynette pointed out that the song was not actually about subservience, but rather advice to women to overlook their husband’s faults if they truly loved them. “Aftur ol, he’s jusst ur may-an.”

I have come to see the wisdom in Tammy’s approach. Forgiveness is good. Even so, the nauseating sight of French heiress and journalist Anne Sinclair standing by her man, Dominique Strauss-Kahn, sets a new low. The former IMF chief may have been acquitted of attempted rape against a hotel maid, but is there anyone who can look at that swaggering silverback primate without a shudder? Ugh.

In the unlovely phrase of Strauss-Kahn’s lawyers, the encounter with Nafissatou Diallo was “brief but consensual”. Whatever the truth, we can be sure that the man who planned to be France’s president rampaged out of the hotel bathroom with only a droit de seigneur to cover his Tour Eiffel. Applying the indulgent term “Lothario” or “libertarian lover” to a priapic bully won’t do any more.

Anne Sinclair is badly out of step with her fellow countrywomen. France is unlikely ever to be the same again post-DSK. There has been a big increase in reports of sexual harassment. Sylvie Kauffmann, the first female editor of Le Monde, says: “There is a tendency among men to pretend that nothing has happened. In the establishment mind, this issue is not very important. But I would bet that the average voter may feel differently.”

Let’s hope Frenchwomen treat DSK’s political ambitions with all the tender concern he showed the hotel maid. And shame on his indulgent wife. If Tracey Emin needed a tent to contain the names of all the people she had slept with, DSK needs a marquee.

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.