What else has been happening recently that deserves more attention than it is getting?
We don’t need to worry about public sector debt – yet
During the Covid era, Britain’s public sector debt has risen at a giddying rate. Public sector net borrowing is estimated to have been £22.3 billion in October 2020, £10.8 billion more than in October 2019, which is both the highest October borrowing and the sixth-highest borrowing in any month since monthly records began in 1993. Not good.
The chart above, however, sets it in context. Public sector debt is still far below the levels maintained throughout the inter-war years and all the way up to 1962. Yes, it’s only the end of October but the monthly deficit – even at current levels – doesn’t increase the debt that much in the short term. If Covid-19 is got under control and the deficit in turn can then be brought back under control, it all looks quite manageable for now, especially with borrowing costs being low at present.
There are three buts. First, it’s far from clear that the deficit will be got quickly under control. The economy has received a hammer blow. The longer Covid-19 continues to wreck the economy, the harder it will be for it to recover as people’s skills waste. A deficit running at current levels for any length of time could make a manageable problem unmanageable sooner rather than later.
Secondly, the voguish idea that deficits and debts don’t matter has a limit. Borrowing costs remain low until they don’t. Things get very ugly then. Six countries have defaulted this year: Argentina; Belize; Ecuador; Lebanon; Suriname; and Zambia. There will be more. This isn’t a theoretical risk.
Thirdly, there’s another long-term threat to the country’s economy lurking: no-deal Brexit. Don’t yell at me, take it up with the Governor of the Bank of England, who is paid to worry about such things.
Moldova looks set to change course
If Moldova is known for anything in Britain, it is as a home of some surprisingly good wines and of the Europop earworm Dragostea Din Tei. It is also one of Europe’s checkpoint Charlies between the EU and Russia. Flotsam from the break-up of the USSR, it was literally torn in two in the aftermath, with an unrecognised state of Transnistria having operated under Russian sponsorship for nearly 30 years now.
It has just elected a new president, Maia Sandu. Ms Sandu is from the pro-EU wing of Moldovan politics but campaigned at least as hard on questions of anti-corruption. Her predecessor and opponent in the election, Igor Dodon was a pro-Russian socialist, and her victory was decisive (58%:42%).
Ms Sandu is to be expected to steer Moldova towards the EU sphere of influence, but she will need to take care because Moldova is a highly polarised society. As well as the separate status of Transnistria, Gagauzia, an ethnically separate and autonomous area in the south of Moldova, claims the right of secession should Moldova ever unite with another country (ie Romania) or joins the EU.
Will anything much of interest happen in Moldova in the next few years? Probably not. But the complex problems of this small faraway state have the potential to unravel if Moldova, Russia or the EU are flatfooted in their handling of events.
From Finnish Karelia to Gagauzia and Ukraine, the eastern flank of the EU abuts a series of frozen conflicts and historical grievances. Western Europeans are far too ignorant and blasé about all of them. Any one of them poorly handled could cause regional or even continental disturbances. There is precious little evidence that the decision-makers are adroit.
The Port of Felixstowe has a huge backlog
Felixstowe is Britain’s biggest container port. And it’s foundering under waves of traffic just now. An accumulation of Covid-19 loads, the pre-Christmas rush and Brexit preparations has left it overwhelmed. The disruption is set to continue well into December and quite possibly beyond.
There are five weeks to go until the Brexit transitional arrangements are due to end. This is a very worrying omen for the changeover to whatever new arrangements the government alights upon.
Those fancying Britain’s future as an exporter should note that large numbers of containers are leaving with a cargo of thin air. Meanwhile, the government is preparing to convert Kent motorways into public conveniences for stranded lorry drivers. The breath of Brexit-labelled freedom comes with a high price and in Kent it looks likely to smell pungent.