PM says ‘red warning lights are flashing’ against a backdrop of instability and uncertainty, as G20 summit draws to a close
David Cameron has issued a stark message that “red warning lights are flashing on the dashboard of the global economy” in the same way as when the financial crash brought the world to its knees six years ago.
Writing in the Guardian at the close of the G20 summit in Brisbane, Cameron says there is now “a dangerous backdrop of instability and uncertainty” that presents a real risk to the UK recovery, adding that the eurozone slowdown is already having an impact on British exports and manufacturing.
His warning comes days after the Bank of England governor, Mark Carney, claimed a spectre of stagnation was haunting Europe. The International Monetary Fund managing director, Christine Lagarde, expressed fears in Brisbane that a diet of high debt, low growth and unemployment may yet become “the new normal in Europe”.
Cameron has adopted the more sombre tone in the runup to the chancellor’s autumn statement on 3 December, when the Office of Budget Responsibility will produce new growth forecasts and spell out the impact on public finances.
“The eurozone is teetering on the brink of a possible third recession, with high unemployment, falling growth and the real risk of falling prices too,” Cameron writes. “Emerging market economies which were the driver of growth in the early stages of the recovery are now slowing down. Despite the progress in Bali [trade talks in 2013], global trade talks have stalled while the epidemic of Ebola, conflict in the Middle East and Russia’s illegal actions in Ukraine are all adding a dangerous backdrop of instability and uncertainty.”
The emphasis on potential dangers, balancing some more hubristic ministerial accounts of the state of the UK economy, reflects Cameron’s concern – underlined by conversations at the G20 – about the extent to which Britain can detach itself from gathering economic storms.
But with Germany, Europe’s manufacturing powerhouse, growing by just 0.1% in the third quarter, the eurozone economy appears to be faltering.
A European Central Bank (ECB) survey showed that inflation would remain at worryingly low levels before picking up slightly next year. The annual inflation rate in the eurozone was near a five-year low of 0.4% in October and the ECB expects a rate of 0.5% for 2014 – well below the target of close to 2%.
The EU may also be only one or two new rounds of sanctions away from pushing Russia into a deep recession as punishment for its interference in Ukraine, a point made in Brisbane by the Russian president, Vladimir Putin.
Full article: David Cameron warns that second global crash is looming (The Guardian)