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May 11, 2017

Germany rejects IMF’s policy recommendations before they are issued

Life must be very frustrating for the IMF’s Germany team, who are currently in Berlin for consultations about the forthcoming Art IV consultations. Whatever they recommend, it is certain to be rejected. Schäuble’s ministry has now gone over to a new tactic: they are not only rejecting the recommendations, but they are doing so pre-emptively, even before they have been issued. German news media had reported that the IMF would demand a shift in taxation towards wealth, especially property taxes, which cannot be avoided through relocation. A spokeswoman for Schäuble pointed out yesterday that Germany was redistributing more income than any large industrial nation in the world. In Europe only Belgium and Austria redistribute more. As reported by FAZ this morning, the IMF is also demanding higher wage increases in Germany, to encourage further growth and to reduce the current account surplus. The IMF also wants the German government to raise investment spending. There are no prizes for guessing what the German response to such suggestions will be.

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May 11, 2017

Why Labour is losing

We cannot ever recall a UK election where there is not even the slightest uncertainty about the ultimate outcome. Even supporters of the Labour Party accept that, and are focusing mostly on trimming the extent of the Conservative majority, and on life after the coming defeat, with reports of break-away factions. Labour's leader, Jeremy Corbyn, yesterday was endorsed by Noam Chomsky, who was on a visit to Britain, but we doubt very much that this will swing it for him. 

On the contrary, things are likely to get worse. As the Guardian and several other newspapers report, the Labour Party’s manifesto contains an unbelievably extreme commitment to a hard-left position, reminiscent of the Labour Party in the 1970s and early 1980s. It includes a commitment to the renationalisation of the railways, the energy sector, and the Royal Mail, plus a £250bn(!) package of infrastructure spending, including a commitment to building 100,000 new social housing units each year. The package also includes the complete abolition of university tuition fees. One of the goals of the renationalisation of energy is to give a big push to renewable energies. There are more details about the policies in the Guardian article, but the main point is that none of this even stands even the slightest chance of being implemented, as the latest poll tracker has the Tories at 46.6% and Labour at 28.9%.

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