Wednesday, 9 October 2013

Großbritannien über alles?

A piece by Matthew Lynn in the Speccie explains, slightly tongue in cheek, why Britain's economy will overtake Germany's - population growth, and we're not in the Eurozone. The UK's population growth isn't of course a matter of unalloyed rejoicing - fuelled by immigration, and without the schools, hospitals or housing in place to support it. But still. If Generation X needs a future young workforce ready to wipe its geriatric bottom I don't suppose it matters if the bottom-wipers are Nigerian PhDs or Cockney graduates. 

Meanwhile elsewhere (£) Ambrose sets out the IMF's revised forecasts for the next few years; the Eurozone stuck in a low growth model for years with GDP growth never getting above half a percent, the BRIC nations at the limits of catch-up growth and levelled-off. The US will power ahead and even the UK, fuelled by a house price bubble (that's me, not Ambrose), will charge ahead. Never forget the compound effects of even small differences in GDP growth rates - as this simple table demonstrates

UK Eurozone

1.50% 0.30%

100 100
2013 101.5 100.3
2014 103.02 100.6
2015 104.57 100.9
2016 106.14 101.21

A strong £ against a weak € will make trade in Europe hard for our manufacturers, but offers the EU a lucrative export market; weak BRIC economies will curtail German export growth focused on them. European capital will want to invest in UK business and all together the UK starts to  assume a much more dominant position in Europe's hierarchy - sharing the top table with Germany within five or six years, with a widening gap between us both and France and Italy beneath. 

Cameron is relying on this change of fortune, I think, to give substance to 'renegotiation' - that the UK and Germany together, for very different reasons but both dealing with domestic political pressures, will act in concert to change the commitment to 'Ever Closer Union'. 

North remains convinced that 'out' is the only way and he may well have the right of it - but with the UK increasingly more important to the EU than the EU is to the UK, it leaves us with some intriguing options.

News that Italian flag-carrier Alitalia is on the verge of bankruptcy again - needing €500m within days to prevent closedown, as they can't even pay their fuel bills right now. The merged Air France - KLM already owns a quarter of Alitalia and may have to increase its stake to keep the eyeties afloat.  BA already owns Iberia of course and is in the process of gently eliminating the brand, which leaves the prospect of just three remaining flag carriers in Europe - BA, Lufthansa and a merged Air France - KLM - Alitalia. You'd need a heart of stone ...


Blue Eyes said...

This is, of course, exactly what started to happen in the mid- to late- 90s before the Left blew the whole thing wide open.

All the government has to do is not f^ck it up. That means taking the reins off housing development, allowing schools to be set up and perhaps even a more consumer-led health service?

Anonymous said...

An interesting thesis Radders.

Tell me then - if these figures are anything like accurate - why do we need the EU?
Because, without the stifling red tape and inexorable mission creep of the Acquis [communautaire] which is leading to total political union, think how much better off we could be OUT - of the union of the damned.
Indeed they are desperate for us to stay - Britain has the chips and commands the table.

Weekend Yachtsman said...

Fuelled by a housing bubble?


The only thing that'll be fuelled by the housing bubble will be the Tory vote share at the next election, which is why they're doing it of course.

Oh and the subsequent inflation and crash - but that will be after the election so doesn't matter, apparently.

A cynic? Moi?

Budgie said...

Your "change of fortune", I am sorry to say, is hubris. We are a decrepit country primarily because the government takes too much money out of the economy and then squanders it.

Moreover we are far too London-centric for the general health of the UK. High London prices come from too much money sloshing around London. That money is the capital's cream-off from all the taxes that pour in from the overtaxed hinterlands (c40% of GDP plus another c10% in borrowings).

The roll-call of idiot government policies (blame the LibLabCon) - Windmills, Solar, insufficient real power stations, HS2, "Carbon" taxes, unsupportable immigration, failing to curtail departmental inefficiency, retaining DfID, staying in the EU, over-complicated tax/benefit system, propping up the BBC, etc - ensures we stay decrepit.

Dominant? Keep Cameronning and we will be begging to be let into the euro in a few years.

cuffleyburgers said...

But Budgie - that is the point of the article; we are crap but the others are even worse

Budgie said...

Cuffleyburgers, and the point of my comment was to say that we are worse.