 With the bunting fading on the floor and the cheering crowds now just echoes in the halls, the Obama “Rainbow Tour” of Europe has finally ended. A G20 meeting, a NATO council and a grand tour of Eastern Europe bore all the hallmarks of a royal progress. As he was paraded from nation to nation the reputation and style of both him and his wife outshone those of his various hosts. The adulation reflected the general desire by many to desperately find an international statesman, a leader or even a saviour to rescue them from these troubled times and especially from the range of deeply unimpressive petty princeling politicians which only Europe seems capable of producing.
However, I hope he enjoyed and appreciated the adulation, as his return on Air Force One will be to a sharply different politic climate where the fickle populous of voters have already been marking down his domestic approval rating really quite sharply. Honeymoon periods always seem too short but especially so in the fetid world of bickering politicians where even the most inconsequential can get air time on the 24 hour news channels.
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There was a lesson last week to be learnt from the Irish Government’s emergency budget – a lesson which I hope was not lost on our own Chancellor as he builds up for our Budget on 22nd April.
Ireland is in a painful spot with an economic boom turning to bust, falling property prices and all compounded by a banking crisis. Any of that sound familiar? However, their situation is made worse by the constrictions of Euro membership and the requirement to keep their budget deficit under some control. As I have mentioned before, the less responsible Eurozone members, known by their acronym as the PIGS, have blown their limits and have found their cost of borrowing getting considerably more expensive. Unlike others Ireland has been brave enough to try and address this painful situation – at the cost of further domestic economic pressure and criticism. Ireland also does not have the benefit or luxury that we have, where of course the UK can just allow the currency to devalue – a 30% drop in Sterling can ease our trading situation significantly – if you are locked into a German dominated currency discipline, your options are somewhat narrowed.
The Budget has initiated the start of an Irish toxic bank, but as yet no final move to take over the banks completely in a Swedish style move. That may yet have to occur. Also taxes have risen and already the spectre of young talent being driven overseas by high tax is also being discussed – an unpleasant event reminiscent of other difficult times for the country.
The main criticism though seems to have been levied at the lack of action by the government on central expenditure. This is something which we particularly in Britain should take account of. The largest employer in the UK is the government and even more so after taking majority shareholdings in certain banks. Since Labour came to power the state sector has bloated to an enormous level and issues of current and future costs must now be addressed – especially with regard to that bottomless pit of pensions for government employees. I wonder if he will have the courage to move? Over to you Alistair.
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And finally.... Staff at a British aquarium have captured a massive sea worm that had been terrorizing other aquatic life. For months, the 4-foot-long creature - apparently called "Barry" - had been devastating a coral reef at Newquay's Blue Reef Aquarium. I thought that was our window cleaner. I hope you have had a Happy Easter. I am off to plan the Egg Hunt for the Easter Bunny, although sadly last year a number were unfortunately eaten by the badgers before we got to them.
Have a good week,
Justin A. Urquhart Stewart
Director
Seven Investment Management Limited
[i] Quoted from Grant’s Interest Rate Observer
[i] Quoted from Grant’s Interest Rate Observer
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