‘The Jewel Has Lost Its Shine’: How the World Responded to the Pound Crisis | Economy

IThe international reaction to the turmoil in the financial markets which saw the pound fall to an all-time low against the dollar is devastating in its condemnation of the policies of the new government, and the astonishment and shock in particular at the will of the Chancellor to experience one of the most stable economies in the world.

In the youS, the criticism was led by former US Treasury Secretary Larry Summers, who took to Twitter to attack what he called “totally irresponsible British policy”, at the same time expressing his surprise that the markets had reacted so quickly and harshly. He said that in itself indicated a loss of credibility.

I was very pessimistic about the consequences of the UK’s totally irresponsible policy on Friday. But I didn’t expect the markets to get so bad so fast.

A strong upward trend in long rates when the currency falls is a characteristic of situations where credibility has been lost.

—Lawrence H. Summers (@LHSummers) September 27, 2022

His long thread ended with the grim prediction that Britain’s financial crisis would not only affect “London’s viability as a global financial centre”, but “may well have global consequences”.

In the New Yorker, John Cassidy wrote that the crisis was all the more worrying for Britain as it came so soon after the death of Queen Elizabeth II, “their last remaining link to a time when their School maps showed large swaths of the earth’s surface. colored in imperial red”. Now, he says, “they face a humiliating monetary crisis.”

He said the Prime Minister, Liz Truss, and her Chancellor, Kwasi Kwarteng, had thrown Britain into a “beautiful economic mess”.

‘The tragedy,’ Cassidy insisted, ‘is that it is all unnecessary. Although Britain has been through many tribulations in recent years, it is the world’s sixth largest economy, its political system is stable and London is one of the largest financial centers in the world. If its government were even reasonably competent, the risk of a financial blowout would be minimal. Unfortunately, this basic civic requirement is not being met.

In Ireland, commentators said the “British blowout” had clearly backfired and urged the Irish government, which is due to unveil its own budget on Tuesday, to learn the lesson. “Ministers Paschal Donohoe and Michael McGrath have been given real-time exposure on exactly how not to do this,” the Irish Independent said in an editorial. “Despite the considerable weight of expectations, the 2023 budget must be anchored.”

Extra spending and tax measures to protect Irish households and businesses from rising prices are expected to cost around €11bn (£10bn) – but unlike its neighbour, Dublin has a budget surplus.

The Irish Times said that, drawing on the London experience, “the message sent by the budget must be one of stability and involve a credible plan for public finances. There should be sufficient resources in place to respond to the immediate crisis – and to allow flexibility to adapt to circumstances next year if necessary.

In Germany the London-based economics correspondent of the Frankfurter Allgemeine Zeitung daily, Philip Plickert, told readers that as a “historian of finance and economics, Kwarteng should consult the history books again to see how a growing double deficit can be dangerous. Prime Minister Truss cannot afford a balance of payments crisis.

German Finance Minister Christian Lindner, meanwhile, told the same newspaper at an event he hosted on Monday evening that he would wait to learn from what he called a “major experience”. which Britain had embarked on, he said: “putting your foot on the accelerator while the central bank is braking”.

The Munich-based Süddeutsche Zeitung called the new policy a “reckless gamble”.

“Such turmoil is more familiar in emerging markets, but not in a highly developed economy like Britain’s. Following the end of Boris Johnson’s government, a change in economic direction was expected, but so radical? Liz Truss said goodbye in one fell swoop to one of the cornerstones of conservative politics: she doesn’t care about strong state finances.

Ulrik Harald Bie, writing for Denmark‘s Berlingske, called the market reaction a “quick punishment for sloppy policy.”

In GreeceThe sterling crisis has brought back memories of the financial emergency of 2010, when rising borrowing costs raised the specter of a collapse in the Greek economy as lack of confidence in the economy was growing.

Government insiders told the Guardian that the tax cuts described by the UK Chancellor were not just “absurd”, but were reminiscent of the populist policies pursued by Syriza, the incendiary leftists elected at the height of the crisis.

“They don’t make sense politically or economically,” said a well-placed official expressing disbelief that Kwarteng had decided to ignore the budget forecast. “It’s as if there was an element of populism, unpredictability and unprofessionalism that we saw in Syriza about the government of Liz Truss.”

Greece came close to default and ejection from the euro zone. But as in this rollercoaster era – and with more than two years until the UK general election – Greek analysts said it would be difficult to predict how the game would end. “It is clear that the Labor Party is on the right track for a landslide,” said the official, requesting anonymity because he did not wish to speak rudely about a government of a country with which Greece traditionally has relations. such strong bonds. “But if there are two more years left for this bungee-jumping Britain, there will be rollercoaster days before it gets there.”

In France the pound rush made business headlines, with broadcaster France 24 calling the Truss government’s mini-budget a “stock market murder game”, while La Croix newspaper wrote: “Liz Truss’ unfunded spending makes plunging the pound… the crown jewel, the pound, has lost its luster.

Le Point magazine accuses Truss of having “lost control of the economy” and giving way to a Labor government, while the financial site Capital, speculates on: “How long [will] the fall, which has been dizzying in recent days, continues?

In much of Africa, British government and pound issues have been relegated to specialist websites and business pages, although in South Africa the South African Broadcasting Corporation led its daily market update with news of the falling pound.

There was positive coverage of the UK outlook however, with a newspaper in Nigeria saying it continued to be a destination for aspiring emigrants. The Vanguard called the UK a ‘friendly and safe place to live’, due to its ban on allowing citizens to arm themselves, which has been ‘strictly adhered to by its occupants’ and a ‘very stable economy “.

From a Southeast Asian perspective, the crisis could be seen as positive by those looking to vacation, shop, buy property or pay school fees in the UK, the Straits wrote. times in Singapore. Now could be a good time to visit the UK, the newspaper said, quoting travel agency EU Holidays, which said it had seen inquiries about holidays to Britain rise by nearly one third.

“It’s the best time for people to go on holiday to the UK because it’s the cheapest rate ever – I’ve never seen the rate drop so low before,” said Mohamed Rafeeq , owner of Clifford Gems and Money Exchange in Raffles City. mall.

The fall in the value of the pound should also be good news for many international students whose tuition fees are due at this time of year, according to the newspaper.

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