The Guardian had some interesting things to say the other day following the launch of Mario Draghi's Outright Monetary Transaction scheme for buying up the bonds of Southern European economies. Its admirable Economics Editor Larry Elliott summed up the drawback of the scheme in one sentence: "The rescue plan involves Governments in Rome and Madrid driving their economies deeper into depression to reduce interest rates they pay on their borrowing". Quite right.
But here is the Leader column, taking much the same tone but with some interesting details which throw light on the Left of centre take on UK economic policy.
"The debt problems for Spain and Italy have worsened partly as a result of their economies slowing down: so strong-arming them into making ever more spending cuts will just intensify the death spiral. If you want a parallel, just look at George Osborne's double-dip recession, created with a very similar mix of "fiscal conservatism and monetary activism". As the chancellor has found, even after Mervyn King has thrown the best part of £400bn at the economy, a recovery can't be rustled up to order."
Firstly, the parallels with the UK are misconceived. The UK has its own central bank which can set interest rates at a level suitable for this country. EMU countries don't. The UK's central bank can use QE to inject liquidity into the economy and keep its bond rates down. Until now, EMU countries couldn't. The UK can allow its currency to devalue to make its exports more competitive. Individual EMU countries can't.
Actually the UK's position is not that much like the EMU countries'. If we are sinking in recession it is partly because of the stasis across the Channel.
Secondly, the Graun's assertion that a recovery can't be rustled up to order, not even when its central bank has "thrown the best part of £400bn at the economy" blows a hole in its own criticism of George Osborne. I'm sorry for labouring the following point, and I only do it because I don't hear it said anywhere else.
The Left has generally criticised Osborne for cutting too far and too fast. If Osborne had cut more quickly (actually he has scarcely cut at all: public spending is still rising in nominal terms) he would have ended up borrowing more money. This is the implicit consequence of Labour's policy, even if it is very rarely stated. If Osborne cut less quickly and deeply, we are invited to believe, the economy would still be growing.
Now read the last sentence of the Leader again: "As the chancellor has found, even after Mervyn King has thrown the best part of £400bn at the economy, a recovery can't be rustled up to order." But where even throwing £400 bn at the economy won't make it grow, why does the Guardian believe that the bit of extra borrowing we might be able to do - far less than £400 bn - would get us out of recession?
After all, we can all agree that "the best part of £400bn" didn't work, can't we?
