Mini-budget backlash is about Brexit – EU committing far worse crimes

Jeremy Hunt hits back at Shadow Chancellor Rachel Reeves

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The UK has been whipped into line by global bond markets, after Kwarteng’s gamble on growth backfired spectacularly.

Yet both the US and EU have committed worse abuses against fiscal sense, without triggering any kind of backlash.

Ever since the UK had the temerity to leave the EU, our financial elites have been waiting to give us a kicking.

Kwarteng’s biggest mistake was to give them the opportunity to do so, by defying economic orthodoxy at a dangerous time for the global economy.

I’m in no mood to defend Kwarteng. The Conservative Party is keen on tax cuts, but in my view, it stands for sound money above everything.

Even voters who do not like the Tories vote for them, because they trust them with the nation’s purse strings and don’t trust Labour.

Kwarteng threw that away by loading another £43billion onto the country’s debt mountain to deliver unfunded tax cuts.

Yet the bond market backlash looks overdone, when you see what the EU has been up to.

EU politicians are revelling in our failures, with Guy Verhofstadt sneering “How is Brexit going?” in a tweet on Saturday.

He added: “One thing is certain: the chaos did not start in 2022, but in 2016.”

While we’re on the subject of chaos, Kwarteng’s mini-budget pales against a vastly bigger policy error, the European single currency.

The euro’s original sin, way back in 1999, was to cobble together a band of wildly different economies into a single monetary union, but with no lender of last resort.

It only survived the euro debt crisis, which began in 2009 but has never really ended, through financial chicanery.

The then ECB chairman Mario Draghi saved the euro by promising to do “whatever it takes” to make the dysfunctional system work, pumping trillions into the eurozone’s financial system.

Bond markets sucked it up.

If they had treated the euro like they treated the pound last week, the euro would have collapsed years ago.

The ECB continues to make unlimited purchases of Italian and Spanish government bonds in a desperate bid to keep their borrowing costs vaguely aligned with Germany.

This policy is known as fiscal dominance, and basically means funding government spending by printing money. There is no end to it in sight.

There is no way the Bank of England could get away with that, as we discovered last week.

Worst, while Chancellor Jeremy Hunt acted rapidly to reverse Kwarteng’s errors, the EU ploughs on unhindered.

And they lecture us?

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The US isn’t much better. President Joe Biden broke protocol by directly criticising UK government policy, saying of Kwarteng’s mini-budget: “I wasn’t the only one that thought it was a mistake.”

Yet Biden has himself made a vastly bigger financial error by green lighting another $1.9 trillion worth of stimulus, on top of Donald Trump’s fiscal blitz.

This flooded the global economy with yet more hot money, fuelling this year’s inflationary chaos.

His recklessness has forced the US Federal Reserve to hike interest rates aggressively, which has driven the US dollar to all-time highs, and put the squeeze on everybody else.

The IMF has joined the pile on, while simultaneously calling for fiscal cuts and interest rate hikes that will drive the world into an even deeper recession

Yes, the UK has made an economic error, but the global backlash is intensely political.

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