May 10, 2010 

LONDON –  Confusion resulting from Britain’s hung election  continues after a weekend of furious negotiations between the three competing parties.

At the time of this writing, no coalition has yet been agreed upon, but a deal is considered imminent.  British parties are not used to forming the types of coalitions common on the continent.

As expected, Liberal Democratic leader Nick Clegg  is playing kingmaker as he negotiates with  David Cameron’s Conservatives, who won the most seats last week, and the Labour Party.   

PM Gordon Brown’s  Labour Party did not suffer the massive defeat the media and pollsters had predicted.  After 13 years in power, deep public opposition to the wars in Iraq and Afghanistan, and a stream of petty scandals, Labour still managed a respectable performance and to retain its bedrock constituencies.

But the specter of the discredited former prime minister, Tony Blair, still haunts the Labour party.

The election’s expected star,  LimDem Nick Clegg, fizzled, winning only 54 seats.  Regional parties won  27 seats. 

Gordon Brown, hunkered down at 10 Downing Street like the besieged Macbeth,    has the right to try to form a coalition with the Liberal Democrats.  But he would still need  the votes of regional parties from Scotland, Wales or Northern Ireland to build a majority.

If Brown fails,  Conservatives will inevitably take power with LibDem support.  But the right-wing Tories are like chalk and cheese, as  Brits say, with the moderate LibDems, as well as with the London-averse regional parties.

Meanwhile, an equally important and  political drama was afoot in Germany.   While Britain floundered, Germany was being called upon to play the key role in rescuing  the European Union from the growing financial crisis that began in Greece and  has been threatening other members of the union.   

German voters bitterly opposed a proposed German 22.4 € billion rescue package to bail  out profligate Greece.  Chancellor Angela Merkel faced a crucial May 9 election in populous North Rhine-Westphalia state just as opposition Social Democrats voted to oppose aiding Greece. 

Merkel’s Conservative coalition suffered a pounding in the north German election.  The defeat cost her party control of the upper house of the German parliament, meaning her future legislation may well be blocked.  The loss may also mark the beginning of the end of the rule of the right-wing German chancellor, known to one and all as, “the Iron Lady.”

A weak, indecisive coalition government in London portends just when    a strong, stable government is needed to confront Britain’s and Europe’s mounting financial crises.  

The election also showed  the wide gulf between England’s well-off Tory south  and the hard-off industrial Midlands and north.  Great Britain’s `other’ nations, Scotland, Wales and Northern Ireland, all rejected the Tories, at least for now, voting for regional parties.

Whoever finally wins power faces grim prospects and the fury of voters.   Brown and Cameron must be torn between  lust for power and the sensible decision to leave Britain’s economic woes to their rival.

Being prime minister at a time like this means political hara kiri.

The Labour Party under Tony Blair and Gordon Brown seriously damaged Britain’s once robust economy.    Britain’s national debt exploded from  £350 billion to  £870 billion under Labour’s rule.

“Borrow Brittania” has replaced “Rule Brittania.”  Two disastrous world wars and  pretensions that it remains a world power  plunged Great Brittania into a lethal spiral of debt. 

Britain’s debt is now 90% of GDP, the highest  since World War II.   The UK  has a mountain of new debt from bank bailouts and ongoing war costs.  

 The European Commission just warned that by year end, Britain’s economy will be in the worst state of any EU member – including Greece.  

The new government in London must quickly slash  £38 billion in spending.  This means severe cuts to education, the creaky national health service, defense, welfare, pensions, farming, railroads, and other politically popular programs.   Britain’s 62 million citizens will be enraged.   The riots we now see in Athens could also erupt in London or Manchester.  Britain may have to finally abandon the pretense that it remains a world power.

Only three years ago, the US and Britain were hailed as paragons of the new `Anglo-Saxon’  model of free markets and go-go business.  Today, we see their supposed prosperity was a fraud fueled by runaway debt and gambling. 

Britain’s oncoming  financial crisis could have ignited a new round of panic in global markets.  The wildly overvalued pound sterling looks certain to soon come under attack.

But the massive, $900 billion rescue package just announced by Europe’s finance ministers,  immediately calmed nervous markets and gave embattled governments in Athens, Lisbon, Madrid and London a security blanket.   The EU agreed to underwrite the bonds of its members, including Greece, at least for the short term.  

Market jitters subsided, and the embattled euro rose over 2% in one day.  The European Union was finally acting in concert and flexing its financial muscle.   But it took the huge scare of Greece’s default to get Europe to do the right thing.  

This important move staves off sovereign defaults for now, but Britain will still have to face the grim prospects of drastic budget surgery.  Citizens of Merry Olde England are not going to be happy.


Copyright   Eric S. Margolis 2010 









This post is in: England, Euro Zone, Europe, European Leaders, Germany

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