Tonight:
4°c
IT'S official. The economy is in recession: figures for the last quarter of 2008 show that there have been two consecutive quarters of negative economic growth. But we knew that.
What we do not yet know is how long it will last, whether, indeed, as David Cameron, the Tory leader, suggests, it may lead Britain to end up approaching the IMF for a bail-out, a suggestion that the Prime Minister dismissed in a BBC interview today as “ridiculous”. He declared that the Government was using “every weapon at our disposal” to combat the crisis.
Certainly Mr Cameron is right to say that Britain's level of indebtedness is terrifyingly high. He is less sure about where we go from here. His hopes for a post-recession economy more biased to manufacturing may be widely shared but manufacturing was weak before this recession and the collapse of historic companies such as Waterford Wedgwood suggests there will be far less of it afterwards to resuscitate.
For London, it has been the crisis in the service sector, especially financial services, that matters more, although it should be said that the collapse in sterling has had its silver lining for those shops, hotels and restaurants that service tourists. But in London, the banking crisis has had an effect on direct employment and on spending, because so many financial institutions are London-based, as well as on the problem shared elsewhere, of banks' unwillingness to extend credit even to good businesses.
In the short term, the Government may have to increase its indebtedness to rescue the banks. And when this crisis is over, the London financial sector will have to look and behave very differently. It must be more tightly regulated; it must be more prudent, more old-fashioned, in its management of risk; its reward structure must emphasise long-term performance as well as short-term profits.
But the City is resilient; it has reinvented itself after recessions worse than this. Its resurrection must be based on recovering its best values and reputation.
London as a whole has been the driving force behind a decade of national economic growth; it can be again, but it will need help both from the Mayor, who has tried to stimulate employment and generate credit, and from the Government.
What's good for London is good for Britain.
Hillary's start
One of the most exciting weeks in US politics ends today with a key appointment by the new Secretary of State, Hillary Clinton. George Mitchell, the senator who brokered the Northern Ireland peace settlement, becomes Middle East envoy. One of the most important foreign policy challenges of the incoming administration is to use its popularity and early authority to begin to build a new settlement in the region.
The recent fighting between Israel and Hamas has starkly underlined that. Mrs Clinton now adds Mr Mitchell to a team of envoys with experience under her husband's administration: the ghosts of (Bill) Clinton stalk the State Department.
In Mr Mitchell, she has a figure who signals a return to what he calls “patient and persevering diplomacy” in the region. That must also call into question the continuing role of Mr Blair as envoy of the “Quartet”, since the State Department is now re-asserting its significance.
Of course, diplomacy has limits. But Mr Obama wants to show his team will take the initiative in a region which became the nemesis of George Bush's foreign policy. That can only be a good thing.
And celebrating…
BRITS at the Oscars. There are no fewer than 27 Oscar nominations for films based on British talent, 10 of them for the remarkable Slumdog Millionaire. But from Kate Winslet in The Reader to Frost/Nixon, the full range of our film talent is being recognised. This paper looks forward to revealing the winners of our own film awards a week on Monday. Meanwhile, the nominations give cheer to us all.
