Full refit is needed, not a patch-up

Dec 3 2009 by Peter Jackson, The Journal

PICTURE Barak Obama’s predecessor, having just taken up the presidential reins, sitting down to type at a computer, only to clutch his head and emit a Homer Simpson-style ‘d’oh’!

For, so the story goes, to make life difficult for George ‘Dubya’ and his new team, Bill Clinton’s aides had – before leaving the White House – prised all the Ws from all the keyboards. The scamps.

One can only hope that, if Labour do lose the next election, they don’t get up to similar childish tricks because I fear that all those Ws, both in Numbers 10 and 11 Downing Street might be called upon early and heavily.

I’m referring to the threat of a W- shaped recession: a recession where we think and hope we have hit the bottom, encouraged by a modest recovery, only to see our hopes cruelly dashed by another dip. It’s a sort of macro-economic equivalent of the dead cat bounce.

In fact, we should be so lucky, as we are the only member of the G20 yet to experience this minor recovery.

There are certainly reasons to fear that neither we nor our neighbours are out of the recessionary woods. In Germany the government is putting together a fresh package of measures after the Bundesbank revealed that the country’s banks are looking at another £82bn of writedowns next year. Germany is now facing a renewed credit crunch with more than half its large manufacturers finding it hard to raise funds.

Elsewhere, Dubai has revealed itself to have been built – economically as well as literally – on sand and its more solid neighbour Abu Dhabi is intimating that it is not necessarily going to pick up the whole tab, which amounts to some £26bn. It seems that sub-prime was not limited to the US after all.

Closer to home the investment bank Morgan Stanley warns that the UK is in danger of a debt crisis next year, particularly if the next election results in a hung parliament.

Of course there is a danger of cherry-picking the bad news and ignoring the good, but the truth is that our present crisis was the result of the perfect economic and financial storm and governments have only responded by patching together a jury rig, not the necessary full refit in calm waters.

:: Peter Jackson is a freelance journalist and former Journal business editor p.jackson77@btinternet.com