Is the eurozone crisis over? The Germans think not…

There was an interesting poll in today’s FAZ conducted by INSA for Bild on whether Germans believe that eurozone crisis is over or not.

The results were pretty comprehensive with 81% saying that they do not believe the crisis is over compared to 7% who do.

Furthermore, 34% of Germans believe that Greece is on the road to recovery compared with 39% who believe the country has not done enough to reform its economy. Clearly they remain very unconvinced by the efforts of the Greeks.

In the same vein, Eurostat this morning put out its first estimate of the debt and deficit figures for the end of 2013. As might be expected they don’t make particularly pretty reading. As the graph below highlights, the debt levels in many EU countries have continued to increase and by substantial amounts in Cyprus, Greece and Slovenia – all due to bank bailouts/recapitalisations.

With debt levels continuing to rise and the long term structure of the eurozone still developing it remains premature to cast the crisis as over - at least the Germans seem to think so.

European Commission gives Germany a slap on the wrist for its current account surplus, but shirks stronger action

The European Commission has today published its in-depth review of EU member states' macroeconomic imbalances. The European Commission's full memo is here.

This is the follow-up to the report which caused quite a stir back in November, as pressure from the Commission and the US mounted on Germany over its significant current account surplus.

This report had been billed as the arena for the Commission to finally rip into Germany for feeding the imbalances in the eurozone and hampering the periphery’s chances of recovery (although, as we noted back then, to us this is not quite the case in reality).

So, what has the Commission done? Well, it seems to have backed away from this somewhat and given Germany more of a slap on the wrist.

The Commission does say that German imbalances require “policy action” but notes:

“The current account has persistently recorded a surplus at a very high level, which reflects strong competitiveness but is also a sign that domestic growth has remained subdued and economic resources may not have been allocated efficiently.”

Not exactly the strong wording some might have been hoping for. Crucially, it also appeases Germany by suggesting:

“The current account surplus does not raise risks similar to large deficits”

Plenty, including some peripheral eurozone countries and the US, might disagree with this assessment, but it’s clear the Commission has been very careful in how it phrases its criticism.

It does go on to outline the need for “sustained policy action” to boost domestic demand and rebalance away from export led growth. But then it also accepts that this is already happening and that the current account surplus Germany has with the rest of the eurozone has been “receding” since the onset of the crisis. There are few specific policy recommendations in there and the general tone is balanced but with a bit of edge to warn Germany of the need to focus on boosting the domestic economy.

As such this assessment may disappoint those who were looking for a strong position, but to us it is in keeping with the current data and evidence. All that said, there might be a double whammy in there for France and Italy as they come in for some surprisingly strong criticism.

France has dodged being moved to the group of countries with excessive macroeconomic imbalances this time around, but the European Commission’s assessment is far from optimistic. France is losing competitiveness for a number of well-known reasons: high labour costs (primarily driven by high payroll taxes), an “unfavourable business environment”, a “low level of competition” in the services sector and “rigidities in the wage-setting system” resulting in “difficulties for firms to adjust wages to productivity”. Compared to the vague comments on the German economy this is a pretty specific series of sectors which need specific policy action.

France’s public finances are another source of concern, since public debt is on the rise and the European Commission expects Paris to miss its deficit targets “over the entire forecast period” – that is, at least until 2015. This seems to confirm that France is obliged to deliver on economic reform this year. Otherwise, being ‘downgraded’ to the club of countries with excessive macroeconomic imbalances will be hard to avoid.

Italy also gets a pretty damning assessment, and joins the club of countries experiencing excessive macroeconomic imbalances – and potentially most exposed to the risk of fines. According to the Commission,

“Reaching and sustaining very high primary surpluses – above historical averages – and robust GDP growth for an extended period, both necessary to put the debt-to-GDP ratio on a firmly declining path, will be a major challenge."

This assessment, along with the Commission’s repeated hints at Italy’s “chronically weak growth”, paints a pretty clear picture of the size of the challenge facing Matteo Renzi and his government – essentially reversing Italy’s recent economic history and trying to ensure surpluses for decades to come.   

We would also like to pick up on the comments on Finland – a new running theme on this blog, you might have noticed. The report highlights similar issues to ones we did, in terms of some big challenges facing Finland, notably, “industrial restructuring”, “deterioration in competitiveness” and a “declining working age population”.

But it is not bad news for everyone. The Commission, for instance, gives Spain a pat on the back by removing it from the group of countries with excessive macroeconomic imbalances. This because, according to Olli Rehn and his team, “The adjustment of the imbalances identified last year as excessive has clearly advanced, and the return to positive growth has reduced risks.” In practice, this means Spain does remain under surveillance from Brussels – but is no longer at immediate risk of sanctions.

The fallout over the next day or two will be interesting, especially with the German media today reporting that internal German government documents admit some problems with the current account surplus (see our press summary and we’ll have more in a blog post soon).

A hint as to what a eurozone grand bargain could look like?

German coalition talks are dragging on, but we may have got a hint as to what a grand bargain between the eurozone north and south might look like, with German Chancellor Angela Merkel again appearing to open up for an EU Treaty change.

She told a Süddeutsche Zeitung leadership conference,

"Germany is ready to develop the treaties still further. At the very least we have to be ready to improve the euro protocol of the Lisbon Treaty – which only applies to euro states – to allow an institutional co-operation via the so-called community method and not to only be active at intergovernmental level."

She proposed a "new co-operation" between the European Commission and member states, with the policy recommendations being the result of negotiations.

She added,

"In this way we create a sense of ownership, a sense of responsibility is created among member states to implement necessary change. That's what I understand by economic co-ordination."

As we've argued before, it's easy to get sustained whiplash injuries from tracking the German position on EU treaty change, but this (again) sounds like 'reform contracts' or 'competitiveness pacts' to us - which we have long argued would come back on the agenda - with the European Commission acting as the 'structural reform police'.

Meanwhile, in an interview with Les Echos and other European papers, Eurogroup Chairman Jeroen Dijsselbloem also had some interesting things to say: 

"If a country is not persuaded that it’s in its own interest to reform and modernise, it cannot be motivated from outside. It doesn’t seem wise to me to propose a ‘reward’ in return for a reform. Instead, I think one should link the concession of additional time to correct budget deficits to stricter conditions in terms of reform. I give you more time if you speed [reforms] up. The European Commission may, if a country fails to do so, demand more on budget [adjustment]."

A lot to play for...

Italian PM launches opening salvo against austerity - but where will the cash come from?

The new Italian Prime Minister Enrico Letta announced his first raft of policies in his first speech to the Italian parliament yesterday. The speech was strong on anti-austerity rhetoric but short on details of how his new approach would be funded - illustrating that ever-so-relevant dilemma in the eurozone (and elsewhere): it's easy to criticise austerity, much harder come up with alternatives. Here are the key points:

·    The government will scrap up to €6bn worth of tax rises, although Letta provided no detail about how this funding gap would be filled. Much of this move was motivated by Silvio Berlusconi’s insistence on scrapping a new housing tax which was laid out as a precondition for the formation of the grand coalition

·    Some phrases which will make German Chancellor Angela Merkel wince, such as: “We will die of fiscal rigour alone. Growth policies cannot wait any longer”, “[Europe faces] a crisis of legitimacy” and there is a need for a “United States of Europe”.

·    Letta believes Italy’s welfare system is inadequate and will look to broaden it to provide further help to women, young people and temporary workers.

·    Businesses will also receive tax incentives to hire young workers.

·    Again no details on how such policies will be funded. La Stampa reports that all in, the “Letta Agenda” could cost €20bn. He made no mention of privatisations or the sorely needed reforms to the labour and product markets to make Italy more competitive.

·    Letta did stress that Italy will meet all of its EU commitments and targets.

·    He set himself and the new government an 18 month window in which to achieve the some success in turning around the economy or “face the consequences”.

·    Promised to reform the electoral law and cut MP’s pay.

A very interesting opening salvo from Letta. In fact, not too dissimilar to French President Francois Hollande’s early comments regarding austerity – we can’t help but wonder if his enthusiasm and/or success will wane in a similar way.

One thing that is clear from the speech is the continuing power of Silvio Berlusconi (as we previously noted). La Stampa suggest up to €12bn of the cost of the ‘Letta Agenda’ actually comes from Berlusconi’s demands, while following the speech Angelino Alfano, the new Deputy PM and key Berlusconi ally, said, “I share the words of Enrico Letta’s speech from the first to the last. It is music to our ears.” Meanwhile, Berlusconi also took the opportunity to this morning ramp up his own rhetoric against austerity, calling for the new Italian government to “renegotiate its deficit commitments” with the EU.

All of this sets an interesting tone and background for Letta’s first meeting with Merkel which takes place this afternoon. As we have noted previously and at length, the key question surrounding this whole austerity debate remains, if not through cuts, then who will pay for the party? Germany and the ECB certainly aren't ready to foot the bill indefinitely and while market sentiment is positive now, it likely could not withstand a new spending spree in a country with a debt-to-GDP of 120% already. We suspect Merkel may make just that very point...

Is the IMF turning bearish on Spain?

It’s been a busy week for the IMF, releasing their latest iterations of the World Economic Outlook, Global Financial Stability Report and the Fiscal Monitor. We’ve been poring over the reports and will continue to do so (see here for some initial thoughts on the WEO). One forecast in particular caught our eye – Spain's.

The IMF seems to have turned significantly more pessimistic on the prospect of a Spanish recovery. The charts below provide a comparison with the previous WEO forecasts (highlighting how these forecasts tend to be overly optimistic) - which very much confirms what we have noted before about the real risks in Spain.

The latest projections for the Spanish deficit (the dark blue line in the above chart) definitely represent a break from previous forecasts. In particular, the forecast for 2014 is 2.3% of GDP higher than in October. The IMF says this is:

“Reflecting the worse unemployment outlook and the lack of specified medium-term measures.”

Translation: the government does not have the necessary budget cuts and reforms in place to meet its desired deficit path – step it up Rajoy.

Such an increase manifests itself in the debt level projections as well. Worryingly, these no longer peak in 2015/16 and level off thereafter. Instead, Spanish debt to GDP is forecast to reach 111% in 2018 and looks set to keep growing rather than peaking and levelling off.

Effectively, this graph also highlights how the forecasts have progressed as the crisis in Spain has evolved from from financial, to a sovereign liquidity crisis and now into a sovereign solvency one. As the IMF notes, sustaining this will be tough:

“[Countries such as Spain] would need to maintain large primary surpluses over the medium term. In the absence of entitlement reforms, projected increases in age-related spending mean that additional measures will still be needed over time, however, to keep the primary surplus constant.”

Translation: Spain needs to run large primary surpluses for a long time, but in the face of increasing welfare and pension spending, this will need to come from a series of additional and painful cuts.

So the IMF does not paint a pretty picture for Spain. Longer and deeper recession, larger deficits at a time when it needs to be moving to surplus and increasing debt, in turn raising questions about the country's solvency. Let’s not forget, that’s before bringing the bust banking sector into the discussion. Plenty for Rajoy to get on with then…

Update 16:20 18/04/13:
Christine Lagarde has reportedly suggested that Spain should be allowed to ease its austerity programme. Lagarde argues that, although Spain needs fiscal consolidation, it does not need to be front loaded. Such an argument is not going to sit well with the eurozone and will increase the tensions within the Troika (some of which were outlined in this FT article earlier today). As the graph below shows such an approach may not fit well with the IMF own growth forecasts. Even with a 7% deficit, growth next year in Spain will be 0.7% according to the IMF. How much more would need to be spent to get to a respectable 1.5% GDP growth? Double the deficit?

Maybe not something this extreme but with debt already heading towards an unsustainble path it's not clear that there is much scope for further spending, while markets may put pressure back onto Spain once again. This raises the prospect of a further bailout or transfers from other eurozone states, but as we pointed out at length yesterday, Lagarde is talking about something very different than removing austerity in that case.

How does our prediction on Spanish regions' deficit stand up?

Last July, we put together this 'traffic light table' of Spanish regions, based on how much each region had to cut its deficit by in order to meet the 2012 overall target of 1.5% of GDP (click to enlarge):

The official deficit figures for Spanish regions were published yesterday, so let's see how our table stands up. Unsurprisingly, Spanish regions have missed their overall target, but by a lower than expected margin. The final figure for 2012 is 1.73% of GDP - only 0.23% above the target.

Five regions have missed their individual targets (well, six if you want to include Castilla-La Mancha, which is on 1.53%, but that may be a bit harsh given that they have achieved an adjustment of close to 5.8%). Three of them (Murcia, Comunidad Valenciana and Balearic Islands) are in the 'red' region of our table. The remaining two (Catalonia and Andalusia) top the 'amber' region.

Credit where credit is due (and we're not just talking about the accuracy of our prediction). Some regions have managed to achieve a very substantial deficit reduction to meet their targets. Think of Castilla-La Mancha or Extremadura, for instance, which started from 7.31% and 4.59% respectively. However, the fact that the country's two most populous regions - Andalusia and Catalonia - remain among the most undisciplined despite receiving billions from the Spanish government's dedicated bailout fund is clearly a source of concern for Mariano Rajoy's government. 

The French Court of Auditors publishes its annual report: Little good news for Hollande

The French Court of Auditors has published its annual report this morning. It is an absolutely massive document, but we have dug out a few interesting findings and recommendations - many of which do not exactly make for happy reading for French President François Hollande and his government:

• According to the Court, France's public deficit for 2012 will "in all likelihood be close" to the target of 4.5% of GDP. However, the report warns that "important uncertainties remain" over the final figure, which is only due to be disclosed at the end of March. Therefore, "a deficit higher than 4.5% of GDP cannot be ruled out."

• Unsurprisingly, the Court stresses that the government's growth forecast for 2013 (+0.8%) is much more optimistic than those made by the IMF, the European Commission and the OECD - which all agree on 0.3%. The 0.5% difference, estimates the Court, could mean 0.25% of GDP increase in the deficit by the end of 2013.

• Crucially, growth forecasts have an impact on revenue estimates as well - especially when it comes to tax and social security deductions (which the French call prélèvements obligatoires, compulsory deductions). The French government is betting on a 2.6% increase of this type of revenue for this year - again, far too optimistic. Tax and social security deductions, the Court explains, are closely linked to how much the economy grows, and have a significant level of 'elasticity' - meaning that they may well be lower than expected even if (and it's a big if by now) the French economy were actually to grow by 0.8% in 2013.

• The Court concludes that the structural deficit targets (which are relevant under the fiscal treaty and the so-called Excessive Deficit Procedure) are "attainable". However, the nominal deficit target of 3% of GDP for 2013 is "very weakened" by the slowing down of the economy. 

• On the recommendations side, the Court notes that the French government's deficit reduction effort has relied too much on tax hikes. Therefore, the Court argues, "Stepping up the efforts to rein in spending in the public administration as a whole is now the absolute priority. In fact, the structural [deficit reduction] effort for 2013 is unbalanced: it relies on public spending control for less than 25%, and over 75% on increases in mandatory deductions." 

Some fairly damning assessments then, and we have only scratched the surface of the report. This is also not the first time Hollande has faced this type of criticism from the Cour de comptes. The French Economy Ministry has responded to the report, saying the government sticks to its targets for 2012-13, but will "reappraise" its growth forecast in the new stability programme, due to be submitted to the French parliament in mid-April. Could this be the first step towards a public admission that France will miss its 2013 deficit target?           

Spain back under the spotlight soon?

We haven't blogged on Spain for a bit, but a couple of interesting developments have caught our attention today. Spain will presumably disclose its final deficit figure for 2012 shortly, and everything seems to suggest that Madrid will let its eurozone partners down once again.

Spanish Industry Minister José Manuel Soria (pictured) told a conference this morning that Spain's public deficit for 2012 will be somewhere around 7% of GDP - higher than the target of 6.3% of GDP agreed with the European Commission.

It is also probably not just a coincidence that Soria's words came just before the European Commission put out its latest update on Spain's compliance with the conditions attached to its bank bailout. The content of the report was not entirely new to us (and the readers of our daily press summary), given that a draft was leaked to El País last week. The document reads,  

Fiscal consolidation advanced in the third quarter, but the 2012 deficit target will likely be missed.

Most importantly, it adds,

The 2012 deficit target for the regions of 1.5% of GDP can...still be within reach for the regional level as a whole, but risks are substantial and a number of regions will most likely exceed their target.

You won't hear us say this very often, but well done to the European Commission for making the right prediction. Of course, we (and others) warned of the risk of several Comunidades Autónomas overshooting their deficit target as early as last July.

Anyway, Catalonia (Spain's wealthiest region) has just announced that its deficit at the end of 2012 stood at 2.3% of GDP - with the overall target for Spanish regions fixed at 1.5% of GDP. With the wealthiest region missing its targets, and few others likely to undershoot theirs to pick up the slack, it seems unlikely that the overall target will be met.

A day of bad news for Spanish Prime Minister Mariano Rajoy and his government - not least because Spain had already obtained a relaxation of its deficit target for this year. The risk is that, once the official deficit figures come out, Spain could face fresh pressure from the markets. Before complaining about being "underrepresented" in the EU institutions (see Spanish Economy Minister Luis de Guindos remarks from this morning), the Spanish government should probably do more to regain its credibility vis-à-vis its eurozone partners. Top EU/eurozone jobs would surely follow.

Another disastrous budget for Greece

This week saw the release of the Greek budget plan for 2013-2016 and it did not make for happy reading. The English version is yet to be released but below we reproduce some of the key facts and figures from the Greek report. The table below essentially sums up the report and the crushing blow it delivers to hopes of a Greek recovery:

Debt peaking at a 192% of GDP in 2014! Astonishing given that less than six months ago the EU/IMF/ECB Troika seemed supremely confident that Greek GDP could stabilise at 120% of GDP by 2020 and would peak in 2013 at only 167% of GDP. (It’s also worth checking out this FT Alphaville post which highlights just how wrong some of the previous estimates were).

It’s easy to say that Greece failed to fully implement reforms and adhere to the bailout conditions (which it did) but at some point the failure of policies themselves and the fudging of the numbers must be admitted.

To many of us all of this was already abundantly clear but the release of the official figures confirming it at least ensures that the political debate will need to be moved on – expect ‘Grexit’ discussions to return to the headlines with a vengeance.

There are also a few interesting nuggets in the budget which suggest to us that further revisions may be likely:

• Firstly, unemployment is expected to go from 22.4% this year to 22.8% next year and then decline to 17.1% in 2016. It’s hard to see how this can happen with both government and private spending expected to fall over this period, while there will also be plenty of labour market reforms which tend to increase unemployment, at least in the short term. 
• Despite dropping by 15% this year, investments are expected to fall by only 3.7% next year and then return to growth. Again this seems massively optimistic without a permanent fiscal transfer supporting Greece and remove the cloud of a Grexit which continues to deter investors. 
• Exports are expected to grow at an increasing rate over the next five years, despite the eurozone and the global economy potentially posting low levels of growth. 
• Private consumption is expected to fall by 7% next year (after 7.7% this year), and yet this is expected to be consistent with a 4.5% contraction in GDP rather than a 6.5% one seen this year. Combined with falling government spending and structural reform this is again hard to imagine. 
• Table 2.5 highlights what could happen if Greece does not implement its medium term fiscal strategy (aka. its austerity packages and structural reforms), putting debt at 220% of GDP in 2016. This highlights how easily the levels could once again veer off track if many of these unrealistic targets are not met. 

As we mentioned in our recent note, a two year extension will be far from enough for Greece and this budget further reinforces that fact. With it now out in the open, discussions over the next few weeks should focus on more than just Greece’s next two years, but the fundamental decision of whether Greece belongs in the euro.

The budget which austerity can't touch?

Amongst all the hustle and bustle of the budget, there's always the interesting side-story of how much, exactly, UK taxpayers contributed to the EU.

Combing through the latest figures released by the OBR today (yes, we're talking the very fine print, which only people with some sort of obsession look at), we noticed a massive discrepancy for the UK’s net contribution to the EU, compared to the figures produced in the pre-budget report back in November.

In fact, the estimate for 2010-11 increased by £1.1bn (13.6%) compared to what the UK government budgeted for in November, while the estimate for 2011-12 increased by £1.8bn (26%). Some of this is expected to be recouped over the following two years with lower contributions but overall the forecasts for the UK net contribution up to 2014 have increased by £1.8bn.

The table below sets out the new estimated net contributions to the EU budget (see here and here to compare the original tables):





Not a sum to be sniffed at given the savings which the government is looking to make and the overall amounts involved here.

So why were the forecasts from only four months ago so far off?

The OBR and Treasury reports from today provide little insight on this front. The main change comes from a fall in the public sector funds which the UK receives from the EU (e.g. farm subsidies and regional spending). Since this falls and the gross contributions stays roughly the same, on net the UK is contributing more.

Why have these funds fallen so suddenly?

Again, it’s difficult to say, but it seems strange given that all the EU spending has been negotiated and laid out well in advance. One reason could be that the UK government decided to shelve some projects which involved ‘co-financing’, where the government has to fund part of the project (between 25% - 50%) to release the EU funding for the rest of it. The government may have reduced such projects to reduce its spending, which would have resulted in it accessing a lower amount of EU funds. It also seems strange to us that the UK rebate did not adjust for this (or has not been forecast to) since part of its calculation relies on how much the UK actually gets back from the EU budget.

This also goes to show the perverse incentives inherent in the EU budget, where national governments have to spend money to unlock the funding (under co-financing) - or see the funds cancelled. Though there's an opportunity to recoup some of the cash further down the road, it puts any government that is trying to cut its deficit in a very difficult position. One way or another, it'll lose out.

In any case, it is more than a little concerning that the forecasts were so substantially wrong only a few months ago (particularly since the 2010-11 budget year had already finished by that point).

The EU budget contribution is clearly not the biggest or most important item on today's agenda - but it's definitely not becoming any better value for taxpayers' money.

Pushing the limit

In the early hours of this morning, Spain's ruling Socialist party, PSOE, and the conservative opposition, PP party, brokered a deal on amending the constitution to include limits on public deficit and debt. An idea that was pushed by Germany and France just last week.

The very fact that the opposing PSOE and PP have managed to agree to something as big as a constitutional change in the space of just a few days is indicative of the depth of the economic problems facing this peripheral member state. The speed of the deal also demonstrates that Spain is committed to dealing with the economic crisis head on.

Despite widespread reports yesterday that the PSOE had "serious" divisions over the amendment, the deal looks to have been reached with substantial political support. All autonomous communities, except Andalucia, said they would support the amendment yesterday, despite entrenched economic problems and a joint deficit of more than €13bn. This isn't necessarily a surprise considering that the PP now hold the lion's share of autonomous communities' seats, and as leader Rajoy likes to point out, the PP has been calling for a deficit limit for quite a while.

The constitutional amendment will not fix limits itself, but will be accompanied by a law limiting the structural deficit at 0.4% of GDP from 2020 (the 0.4% limit breaks down into 0.26% for the central government and 0.14% for Spain's regional governments). This is far stricter than the mooted 3%, which was rumoured to be the target level over the past week (in line with the original Growth and Stability Pact). The amendment also comes with a rather interesting get-out-clause, as it allows deficit limits to be overridden in cases of natural disaster, economic recession or other exceptional circumstances.

This undoubtedly gives any future government significant scope to suspend the limit, as long as it can count on an absolute majority in the Spanish Parliament. Add in the fact that the specific levels which the limits are set at are enshrined in law rather than in the constitution directly (making them much easier to amend), and the proposal begins to look more like a gesture to Germany and the ECB than a substantive shift.

While political support for the measure has been strong, it's certainly not universal. Many have argued that a constitutional change shouldn't be made in such a small period of time and without the consent of the people. It's only the second amendment made to the constitution since it was written in 1978 after the fall of Francisco Franco's dictatorship.

Spanish unions and the United Left coalition yesterday threatened to mobilise calls for a referendum and said they would put the constitutional change at the heart of their election campaigns. If twitter is anything to go by, this could be a popular move. Following the announcement on Tuesday, the public turned to twitter to call for a referendum as #yoquierovotar (i want a vote) trended. The next day the second biggest left-wing daily Público led the calls for a referendum (pictured above).

Despite this, neither PSOE nor PP have even publicly contemplated the idea of a referendum. Now that a formal proposal has been made, Parliament will vote next Friday, and it will go to the Senate the week after. In both chambers it needs a three-fifths majority.

Even though introducing the debt and deficit limit is a positive move and should gain Spain some leeway with the markets, it doesn't change the fact that the problems that led Spain to this point were not ones of massive public debt or deficit but a huge real estate bubble, excessive private sector debt (both leading to banking sector troubles) and a decade of lost competitiveness.

Ouch!!!

Usually mild mannered Swedish politicians have certainly displayed an unusual willingness to communicate strong opinions on European political issues of late. After some forthright comments on twitter from foreign minister Carl Bildt on Lybia recently, we now have finance minister Anders Borg eviscerating Gordon Brown’s reputation and lingering chances of becoming the new head of the IMF.

Speaking to Jeff Randall on Sky News, Borg said:

“It would be difficult to have a person that is so responsible for the fiscal crisis in the UK at the helm of the IMF… a country with a 10% deficit is I think a little bit problematic… the IMF today is very much about restoring fiscal responsibility”

Borg went on to tell Svenska Dagbladet that:

“He has been one of those who has argued for the deficit politics that we now see the results of. It would be odd to argue for him.”

For Gordon Brown, the self-styled saviour of the world, that has got to hurt. Nevertheless, it's refreshing to hear politicians who are not afraid of speaking their mind.