Martin Flanagan: King trumps Trichet with Bank’s focus on growth

There was a markedly more relaxed mood across the continent’s bourses as hopes of a euro deal rose but it could not hide the poor showing of the European Central Bank in the longer term

A STRONG rebound in stock markets shows that the white smoke emanating from policymakers, floating a major write‑off of Greek debt and a substantial recapitalisation of European banks, has gone down better on reflection than was the case initially. However, even on reflection it is difficult not to infer that the European Central Bank (ECB), in particular, has not had a good war as far as the gathering economic downturn over the summer is concerned.

By contrast with the mistakes of the ECB, our own Bank of England seems to have judged things much better. Worried about inflationary pressures, the ECB raised interest rates by a quarter point in April and again in July to a current 1.5 per cent

In short, the European Central Bank, under its president Jean‑Claude Trichet, was disastrously going up when the economic escalator was descending.

That tightening of policy now looks seriously mistimed given the worrying slowdown across Europe, particularly in Germany, that has been aggravated sharply by the sovereign debt crisis. Now pressure is mounting on the ECB not just to soft‑pedal on further monetary tightening, but rather reverse the rises in the face of increasingly cataclysmic warnings from European politicians and the International Monetary Fund.

Over here, meanwhile, the oft‑maligned Bank of England under Sir Mervyn King seems to have called it better. The BoE held its nerve as inflation has stayed well above its medium-term target at 4.5 per cent, refusing to be panicked into raising rates from historic lows of 0.5 per cent.

As economic data has darkened, the BoE has gone farther, hinting at another round of quantitative easing, even if CBI director general John Cridland yesterday voiced doubts about the wisdom of such a move.

The ECB has taken a focused (blinkered?) line, with inflation trumping every other consideration. Unofficially, perhaps, the BoE has taken an approach closer to the US Fed, where economic growth is seen as something also to be weighed in the balance alongside inflation.

Nobody wants to be glib about the latter. But, with the threat of a double dip global recession and the chaos that any failure of the euro on the back of the debt crisis would have, the BoE’s balance approach looks to have been a better ticket through the crisis so far.

Miliband distances himself from Blairite ‘relaxation’

ED MILIBAND has rattled business cages with talk of his distaste for asset‑strippers and fast buck merchants. At worst, they feel like facile slogans playing both to the gallery of old Labour prejudices, and a worried wider society under the economic cosh and staring straight at darkening horizons.

But perhaps the Labour leader, at the party’s annual conference, felt he had to distance himself from the former Blairite/Mandelson administration being “intensely relaxed” about people becoming filthy rich, including Blair and Mandelson themselves.

Miliband is probably concerned that the electorate still feels unsure of what he stands for. A dose of visceral lambasting of the business community’s more unappetising shores from the rostrum may have seemed a good, easy target.

Business cannot afford to burn bridges with Labour even if it is out of power. The likes of the CBI, Institute of Directors and British Private Equity and Venture Capital Association were therefore measured in talking up the Labour leader’s support for business investment, innovation and world peace (OK, I made the last bit up). But the unmistakably narked rejoinders by business and financial lobby groups to Miliband’s more colourful criticisms of some of corporate life show they were surprised at the soundbite‑sandbagging in Liverpool. I liked the BVCA’s acid comment that debt‑laden, double‑dip threatened Britain’s biggest danger was not a fast buck society but a “no buck society”.

The business world will be watching the Labour leader carefully from here. But, after this speech, even if a tad rent‑a‑prejudice to critics, Miliband will not easily be seen in the public mind as any patsy to the business lobby as unemployment rises and if the national mood darkens.