Sean O'Grady: Brown must resent France and Germany's growth

The modest upturn in Europe’s largest economies is more than we have seen
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The Independent Online

For France and Germany, the recession is over. It must be galling for Gordon Brown that the big European economies, with whose leaders he has repeatedly clashed over how to beat the recession, are returning to growth more quickly than Britain.

For a decade, we listened to Mr Brown's triumphalist Budget speeches, banging on (literally) about how well the UK was doing compared to her rivals across the Channel. Was it not Mr Brown's own successor as Chancellor, Alistair Darling, who declared not so very long ago that Britain was "better placed than other economies to withstand the slowdown in the global economy"?

Hmmm. The modest growth that continental Europe's two largest economies managed to secure from April to June may have come as surprise, but it is more than we've seen: Over the same period, the British economy slipped back again, and by more than anyone thought possible. The German Chancellor Angela Merkel, facing elections next month, ought to be happy that her policies appear vindicated. So have she and President Nicolas Sarkozy managed the recession better than Gordon Brown? You may recall the arguments that dominated the spring G20 summit in London, a supposedly glittering display of Brownian economic leadership spoiled by tantrums from the French and truculence from the Germans.

Mr Brown and President Barack Obama wanted the world to borrow and spend its way out of recession. Mrs Merkel's ministers condemned our "crass Keynesianism". The revived Franco-German axis also ensured that the European Central Bank did not embark on the vast experiment in printing money that the Bank of England and the US Federal Reserve have been engaged in. It is like an economist's dream experiment: a global recession fought with different strategies in different nations. Who was right?

The great irony in all this is the fact that the Europeans have proved perfectly happy to spend vast sums of public money to preserve jobs and industries, more indeed than their rhetoric would suggest. Mr Sarkozy had less need to do so, because the French economy has such a large state sector, thus insulating it from the worst of the downturn. Where that leaves his plans to emulate Thatcher/Blairite economic reforms and shrink L'État is yet to be seen. But in relation to the size of their economy, the Germans have spent much more than the French or British on everything from job subsidies to a very generous car scrappage scheme.

The telling point is that Berlin has been able to do this because it had run its public finances much more, er, prudently than the British did in the run up to the crisis, and thus had more "headroom" to help support their economy when things started to go wrong. But the point is that in Germany the federal government could boost the economy without resorting to "printing money" on the scale the Anglo-Saxons have indulged in (German fastidiousness about printing money has deep historic roots).

Whereas, as Mervyn King, the Governor of the Bank of England, has pointed out, we entered the recession with too much public borrowing, and the Germans did not. In the good times they left their overdraft facility alone, ready to use it up when the bad times arrived, as they surely have. Mr Brown, by contrast, maxed his out in the good years.

If further troubles arise – by no means impossible – he will be helpless. The Germans still have room to expand government spending without inflating the money supply. Whatever the German word for prudence is, Mrs Merkel ought to adopt it as her election slogan. That really would annoy Mr Brown.

Still, the British recovery is not far away, and may even be under way now, a few weeks behind the French and German revivals. By the time of the next election it too should be apparent, though "slow and protracted" as Mr King says. Even so, Mr Brown will have what Alastair Campbell used to term "a narrative", and a better one than many admit now. He will be right to say that he saved the banks, stabilised the economy, borrowed and spent when he needed to. He will be right in saying that the Tories opposed him.

However there is still the lingering feeling that, while he worked hard to get the nation out of its terrible mess, he also helped get us into it in the first place.

s.ogrady@independent.co.uk

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