No need for a Plan B here either... No 10 rejoices as Mitt falls short

Cameron congratulates his 'friend' on election victory as he continues tour of the Middle East

Although Downing Street kept out of the US election – in line with tradition – there was genuine relief at No 10 yesterday that David Cameron would not have to forge a relationship with Mitt Romney, the Republican candidate.

Cameron aides were privately scathing of Mr Romney when he visited Britain this summer and united the political class against him by suggesting London was not ready to host a successful Olympics. Relations would have been repaired if he had won, continuing the "special relationship" over which UK prime ministers obsess, much to the White House's bemusement. But Cameron aides were very happy that their US election Plan B remained in the bottom drawer.

Mr Romney has surrounded himself with neo-Conservative advisers from the George Bush era and had been expected to adopt a more aggressive foreign policy – including a tougher stance against Iran over its nuclear weapons programme.

The Iran issue has the potential to split the UK's Coalition Government, because the Conservatives would be likely to back US or Israeli air strikes and the Liberal Democrats likely to repeat their opposition to foreign intervention in Iraq.

Historically, the Democrat and Conservative parties have not been soulmates, but Mr Cameron has bonded with Barack Obama. They have worked hard to stay "on the same page" over tricky issues such as last year's intervention in Libya and the pullout from Afghanistan by the end of 2014.

The other reason for No 10's relief is that Mr Obama has not joined the long list of 17 national leaders who have lost power since the global financial crisis began in 2008. "It shows that incumbents can win if people see the economy is going in the right direction," one Cameron ally said. "That gives us hope for 2015."

Mr Cameron was briefed on the Obama victory by officials when he woke up at 5am yesterday in Amman, Jordan, on the final day of a Middle East visit. He was quick to offer his congratulations and to hail his pal as "a very successful US President". The two leaders are expected to speak by telephone shortly. Mr Cameron said: "Here in Jordan I am hearing appalling stories about what has happened inside Syria so one of the first things I want to talk to Barack about is how we must do more to try and solve this crisis."

Labour dismissed Mr Cameron's tribute, claiming the Coalition Government had done the opposite of Mr Obama's huge fiscal stimulus by cutting spending "too far, too fast" and killing the growth seen in the US. Douglas Alexander, the shadow Foreign Secretary, said Mr Obama's victory address was "a speech of a centre-left politician", not a centre-right leader like Mr Cameron. "The difficulty for Downing Street is when Barack Obama says 'we're all in this together', the American people feel inspired; when David Cameron says 'we're all in this together', increasingly the British people snigger," Mr Alexander said.

The Liberal Democrats regard themselves as the most natural allies of the US Democratic Party.

Markets plunge as 'fiscal cliff' fears intensify

Barack Obama's honeymoon with the financial markets ended within hours yesterday as shares slumped amid fears over the impact of the $600bn (£375bn) "fiscal cliff" on the US economy.

London's FTSE 100 Index fell by more than one per cent, and stock markets across Europe also suffered.

The markets in Italy and Spain fell by more than two per cent. In the US the Dow Jones Industrial Average lost 300 points, or 2.4 per cent, last night.

Russell Lynch

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