Gordon Brown is in Washington this weekend, along with the other leaders of the G20 countries, attempting to come up with a solution to the global economic crisis. The ambitions for the group are huge, with suggestions of a global stimulus package and perhaps the creation of a global financial regulatory body. And it is the first time that the leaders of the G8 countries have met to discuss the current crisis with the growing economies like India, China and Brazil, which analysts say will be crucial in jolting the world out of the financial mess its in. But despite the big plans, everyone knows that at this weekend's meeting little is likely to be committed because of one very important absence from the conference: Barack Obama. With the Bush Administration leaving office in two months, countries see little point in making firm commitments now when everything could change come January.
Just now the summit has released a declaration of intent, with key points saying that each country has committed to financial stimulus, with each using government money to prop up the economy. It's also come out with pretty damning language about what got us into this mess, laying the blame on the door of the US and the lack of macroeconomic regulation.
But with little concrete policy news coming out of the meeting, the media in the UK has focused today largely on some side comments made by prime minister Brown on the sidelines. The comments were a response to something said by the Tory shadow chancellor George Osbourne in the Times newspaper today. Osbourne told the Times that Brown's stimulus plans could cause a "proper sterling collapse, a run on the pound." From Washington Brown lashed out at the comments as "irresponsible," suggesting that talk like that could become a self-fulfilling prophecy.
Osbourne's rant was the first time a senior UK politician has suggested that the country may be just weeks away from a currency collapse similar to what happened in the early 1990's. The pound has lost more than a quarter of its value in four months, dropping from over $2.00 in July to less than $1.50 today. It has also plunged against the Euro, declining by 20 percent just in the last month, particularly in the last week. A Euro is now worth a shocking £1.16. If the currency continues falling at this rate it could be worth less than a euro by the end of the year. With an economy that has become almost completely reliant on financial services, currency speculators seem to have concluded that the UK is going to be disproportionately affected by the economic crisis.
As someone who lives in continental Europe but whose savings and salary are in pounds, this is obviously not good for me. In fact the timing of my little jaunt over to the continent apparently couldn't have been worse. Considering I'll be moving to Zurich at the end of this month (the pound-franc exchange is also not good), it's really hitting home how volatile working across borders can be, especially in times of economic turmoil such as these.
It is clear that Osbourne and many other Tories are hoping that a currency collapse could damage Labour in the same way that the Tories were hurt by the sterling crisis in 1992. But as someone who's livelihood depends on that not happening, I share Brown's annoyance at Osbourne's seeming attempt to use the economic crisis to score political points.