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Democrat November-December 1998 (Number 33)

Global crisis knocks EURO

Czechsign opposing euro

Arguments used to justify the government's decision to make the Bank of England "independent" are looking increasingly threadbare as Chancellor Gordon Brown dropped enormous hints that interests rates should be lowered and Tony Blair wrung his hands over the state of the economy blaming "global conditions."

Making the Old Lady of Threadneedle Street "independent" and giving the power to set interest rates to the bank's monetary committee by the Labour government immediately after the election was, of course, a precursor to handing over economic power to the European Central Bank - ECB - in Frankfurt.

Mr Blair told us that this "independence" was necessary to take the running of the economy "out of the political arena" in line with his obsessive adherence to the quasi-religious globalist economic philosophy which says the unregulated free market was a rational way of running the world. However, the sight of Blair pitying Fujitsu workers in Newcastle who had just lost their jobs because of the strength of the pound making exports more and more difficult to sell should be enough to suggest that something is seriously wrong.

Fickle free market

The fickleness of believers in "free market" fundamentalism was cruelly exposed when Japan broke ranks and pumped a staggering 300 billion of public money into the country's failing financial sector, temporarily nationalising its largest banks in a spending spree that has been coined "socialism for bankers". Also an increasingly desperate United States Federal Reserve cut interest rates in as many months in what was clearly a political decision to boost the economy and kick start much needed growth.

The actions of Tokyo and Washington followed predictions by the World Trade Organisation, in a sharp revision downwards of its previous estimate, that growth in world trade would more than halve this year and slump further next year as a result of Asia's crisis. The WTO's chief economist, Patrick Low, said the growth in world trade was forecast to halve to four percent in 1998, revised down from a previous estimate for seven percent, from 1997's 9.5 percent, and to around three percent in 1999.

The forecast for a downward spiral in world trade growth was in sharp contrast to its prediction in March that Asia's crisis would cause just "a small dent" in the world economy. Despite this the heads of the ECB and Germany's Bundesbank, Wim Duisenberg and Hans Tietmeyer, have dismissed global recession fears and maintain that "core" European nations should refrain from interest rate cuts to help global growth.

Controls called for

However, Oskar Lafontaine, the German Social Democrat party leader nominated to become finance minister in the new government, called for more political control over EU economic policy, calling for something called a "European economic government" to co-ordinate budget, tax and social policies in the coming euro superstate.

Ultimately, however much these thieves fall out they all agree that democratic control of economic policies within the nation states of Europe is the main enemy.