forgotten Isabella II. In Great Britain sends the serious financial and political crisis that forced the new prime minister, appointed only 40 days ago, to suddenly fire his most trusted minister, the Ghanaian-born economist Almost fourth. And back off its ultraliberal economic agenda.
trellis was elected successor of Boris Johnsonforced to resign after various scandals, in the vote of party members despite not being the favorite of deputies, inclined to the more orthodox Rishi Sunak, his great rival and former Minister of Economy. His success in the primary was to ensure that lower taxes, regardless of deficit, would generate growth.
Said and done, on 23 September his Minister of Economy, Kwasi Kwarteng, triumphantly presented a mini-assumption (with no revenue or expenditure forecast) with a tax cut – the largest in 50 years – of 43,000 million pounds (about 58,000 million euros). The most emblematic – and controversial – was corporate tax reduction from 25% to 19% y abolish the maximum of 45% for the wealthiest taxpayers in terms of income. Motivation: Leaving more money in the hands of businesses and the richest would encourage investment and benefit the entire economy and employment. It was said, due to the priority given to deregulation and private investment, that Thatcherism was returning, but Thatcher has always supported spending cuts. And Britain at the time, with a lot of weight in Europe, was not the one of Brexit which, wanting to recover British sovereignty, isolated it.
The theories justify everything, but the reality is harsh. They say financial solvency is something that takes time to achieve, but is destroyed in a minute. And the markets didn’t believe Truss or Kwarteng. Immediately, British debt interest rose, the pound began a collapse that brought it closer to parity with the dollar, panic spread and the Bank of England had to intervene by holding the pound and buying the British debt (and protect pension funds that trusted her).
In short, to avoid disaster, the Bank of England (BoE), which, worried about inflation, raised interest rates, was forced to do the wrong thing: inject more money into the economy. The result was growing unease, the IMF issued an unsolicited opinion calling the plan fiscally irresponsible and the BoE announced that its speech would end on Friday.
And on Friday Truss was forced to fire Kwarteng and replace him with Jeremy Hunt, from the more orthodox wing of the party. And it is that Truss also ran into the bad mood and the almost rebellion of his own deputies. He was alone in the face of danger and already at the Conservative conference last week he had to withdraw the abolition of the maximum of 45%. The fear was that the tax cut would eventually lead to a sharp cut in social spending and electoral defeat in 2024. Polls now give Labor a 30-point lead.
Truss wants to survive and has sacrificed his close neighbor Kwarteng, but the financial crisis is not over and his prestige in the party and in the country is at a minimum. It is not Thatcher that she wants, but that she calculates well.
With Brexit, Britain entered a nationalist drift that led it from the temperate conservative Cameron (Aznar said he sinned with two referendums, Scotland and Brexit), to the unresolved Theresa May, the demagogue Boris Johnson – purged of the same deputies to whom he gave a large majority – and now Liz Truss, a prime minister who the Financial Times describes as a zombie. Four prime ministers since 2016 in the country of stability while in Spain there have been only two (albeit very much attacked).
Forgetting reality (Britain had been in the EU for many years and Thatcher never wanted to eliminate it) ended up leading to dangerous instability. And the fantasy: believing that a medium-sized country can spend much more than it collects without the markets sanctioning it. And the punishment of the markets leads to political failure. fejoofor taxes and Sanchezsince expenditure also counts, they should take this into account.
