Country debt burdens keep bubbling to the surface as serious concerns, even as a lengthening string of positive US economic data suggests some of the worst risks to markets have been skirted. Nuanced attitudes are emerging to the problems plaguing the PIIGS – Portugal, Ireland, Italy, Greece, and Spain.
Hedge fund managers, who are often willing to rush in where fools fear to tread, have begun making positive noises about some PIIGS even as they write off the hopes of others. Greece is a basket case, widely expected to default, with the only argument left being how long it will take. Portugal doesn’t look much better. But Ireland is in favour as a bargain for debt securities because its underlying economy is holding up better than expected, and Spain is being viewed as a near miss for collapse and consequently a golden opportunity.
So what is the distinction between PIIGS that will flounder and those that will bob back up to the surface again? The magic words are “economic growth”.
Spain and Ireland are expected to return to growth and thereby reduce their debt burdens in relative terms, whereas Greece and Portugal have not grown significantly for years and are largely regarded as incapable of changing their ways.
These distinctions in assessment of peripheral Europe are relevant to New Zealand, because as our finance minister Bill English likes to point out, our country is right up there with the PIIGS if you sum together its public and private debt.
Even more piquant, we have a new Budget coming up and former National leader Don Brash is now the leader of the ACT Party.
The degree to which this Budget will be about economic growth that will haul New Zealand out of the PIIGS’ sty and Dr Brash’s ready criticisms and existing political manifesto in the 2025 Taskforce reports will be the defining issues of the general election campaign to be decided on November 25.
The best pro-growth policies are the core election issue and they have bearing not only on the long-term prosperity of New Zealand, but its very viability as a civilised Western country future-proofed against relapse into the economic Stone Age.
New Zealand’s fundamental problem is to generate the type of growth that will avert a mandatory diet of PIIGS swill, and while prime minister John Key and Labour leader Phil Goff have displayed little appetite for this necessary discussion, with the revival of the political fortunes of Dr Brash they will find this particular dish rammed down their throats.
Politics is filled with cruel ironies and its twists of fate have odd ways of coming back to haunt people.
Former ACT leader Rodney Hide had Dr Brash appointed to head the 2025 Taskforce
as part of his party’s confidence-and-supply deal with the National minority government and must have chortled at the thought of his political in-joke.
Messrs Key and English lost no time publicly consigning the Taskforce’s results into the rubbish bin, sneering their hubristic contempt.
The upshot is that the scorned and underestimated Dr Brash is leading the charge at this election for the revitalised right wing of the National Party under the ACT flag of convenience.
Will the Key gamble pay off in having imitated Tony Blair’s New Labour approach of wearing the guise of the displaced former government in order to win subsequent terms in office?
Mr Blair’s challenge was to appear Tory enough to be trusted with re-election, whereas Mr Key has aped a born-again social democrat, for example praising the ruinous Working for Families that he once condemned as communism by stealth.
Mr Blair was seen as to the right of New Labour, whereas Mr Key is likely to be perceived as to the left of his “New National”.
The Labour-lite regime of Mr Key has Mr Goff on the ropes, with distinctions hard to make from when Helen Clark ran the roost, given that both former and current prime ministers like to wear the trousers around the House.
But this regime will find it more difficult to deal with a combative National right wing trading under another brand and claiming to represent what National actually stood for until it succumbed under Mr Key to retaining whatever of the Clark era might cost it votes to repudiate and resorted to appeasing the racist Maori Party as a coalition partner insurance policy.
The upcoming election is essentially about the National right versus the National centre-left fighting over economic growth policies.
We already have Mr Key hypocritically dismissing Dr Brash as “extremist” – despite cheerfully serving as opposition finance spokesman under his old political boss rather than sit in protest on the backbenches like Katherine Rich – and having ruled out the 2025 Taskforce’s reports as unacceptable.
Back into the avaricious arms of the Maori Party, anyone?
Michael Coote is a financial writer based in Auckland. This article was first published in the National Business Review, Friday, May 13, 2011