Created: Tuesday, 15 February 2011 13:50
Written by David Yaffe
The arrogance and self-confidence of the ConDem government took a knock on 25 January, when growth figures for the economy unexpectedly showed a fall in Gross Domestic Product (GDP) of 0.5% in the last quarter of 2010. With the annual inflation rate (CPI) shooting up to 3.7% in the year to December 2010 and youth unemployment hitting record levels, the government’s austerity programme is seriously being called into question. Far from the British economy being ‘well placed for a return to sustained, balanced growth’, the talk is of stagflation – recession and inflation combined. The pound fell to a two-and-half month low against the dollar. The chancellor’s attempt to put the poor figures down to freezing weather in December was laughed out of court. This was, after all, in a period of relatively strong growth in the global economy and with a 25% depreciation of the pound since 2007 boosting manufacturing exports and growth. David Yaffe reports.
A day before the growth figures came out, the departing head of the Confederation of British Industry, Richard Lambert, a friend of the Coalition, told the government that it had taken policy initiatives for political reasons that could damage the economy, and it still had no strategy for growth. Nouriel Roubini, one of the few economists who predicted the financial crisis, grouped the UK economy with the crisis-ridden parts of the eurozone, saying that there was a risk of a double-dip recession. And George Soros, the billionaire international speculator, said the government would push the economy into recession unless it modified its austerity programme.
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