CITY AND SUBURBAN
Expletive deleted after the $2 martini, here comes the negroni crisis
CHRISTOPHER FILDES
T, he man who got it right was Richard M. Nixon. When he was President, and the world's currencies were (as now) in tur- moil, the chairman of the Federal Reserve was concerned that the market's pressures would (as now) find a focus in Italy, desta- bilising the lira. He told the White House and the White House told the Oval Office. Mr Nixon rose to the occasion. 'I don't', he replied, 'give a [expletive deleted] about the lira.' His verdict was recorded on tape, and emerged in the Watergate hearings, scandalising William Rees-Mogg, who as editor of the Times thought that this was no way to talk on so serious a topic. It was and is just the way to talk. The Italians have been heading the rush towards monetary union, believing that when the day comes their financial troubles will be over. Offi- cials in the Finance Ministry and the Banca d'Italia favour it, arguing that anything would be better than having to work for Italian politicians. The bill for all these sim- plistic assumptions has now started to come in. It worries other members of the Euro- pean Exchange Rate Mechanism, who fear that if the Italian wheel comes off their Whole conveyance may collapse. (The Finns, who were semi-detached, have come Off already.) The danger is of digging in to defend the indefensible. Direct observation suggests that at these exchange rates a negroni is as overpriced in Florence as a martini is cheap in New York. What rocked the lira in Richard Nixon's day was Britain's decision to float the pound, justi- fied by a Conservative Chancellor. Experi- ence showed (he said) that a country Should not wait too long to change an exchange rate, if balance of payments trends were adverse and the exchange rate came under pressure.
Beyond the fringe
HARD TIMES, in Britain and Italy, Prompt hard questions. Is the squeaky Wheel entitled to an extra share of the grease? Both countries' policies have for long assumed it. Here, an ancient Treasury formula for public spending lays down that Scotland, Wales and Northern Ireland will always get bonuses — higher spending, in relation to the number of people who live there, than in taciturn England. Now the E.n.glish and the Treasury are squeaking up. Michael Portillo, Chief Secretary and saver
of candle-ends, wants to tear up the rule and start again. Why should the hard- pressed English economy forever have to carry this dead weight? In Italy, how long will the north have to pay for the south? The Lombard League, under the aptly named Dr Bossi, asked northern voters that question, and swept the polls. His policy, as I understand it, is to saw the country in half and push the southern section out to sea. It could float across and join Libya, with which it has something in common. I sug- gest that the lira goes with it. Then the prosperous, organised, law-abiding, taxpay- ing north (aim off a bit for rhetoric) would see its florin or ducat soar to the top of the European league table. Can this be the birth of a new nationalism, where the cen- tre splits off from the fringe? Watch the empires strike back.
Pink and white
HOW NICE to see the Trades Union Congress's contribution to economic policy well up to its usual standard. As the reces- sion enters a third year, what does the TUC advise? Answer: not to mention the black economy, or blackmail or blacklegs, since these terms are deemed racist and negative. Nor, even though the economy is full of dis- advantaged persons, should the Treasury be called blind to reason, deaf to argument or crippling in its effect on industry. The TUC meets this week in Whitepool.
Up the injunction
CHARTERAIL, the railfreight group, has made a connection to Brussels. Its bold attempt to put private capital and new tech- nology into getting goods back on the trains has fallen foul (as I was saying last week) of British Rail. Now Charterail is asking Sir Leon Brittan, Europe's commissioner for competition, to rule that BR has abused its
dominant position in this market, and seek- ing a 30-day injunction. If Sir Leon finds against BR, he could impose a fine of up to 10 per cent of its turnover. This threat to the public finances ought to concentrate ministers' minds on their plans for the rail- ways — and make them ask whether BR is trying to help them or hinder them.
Try Chile, Lilley
I CAN help Peter LiIley, the minister whose E70 billion budget creaks at the joints with every failure of the Treasury's economic forecasts. He, poor chap, was posted to the Department of Social Secu- rity to bring that budget under control. I advise him to consult his opposite number in Chile, where an enterprising government has nursed its country's credit back to health and has successfully privatised the old age pension. How? Simply. Chileans in the state pension scheme have a choice. They can stay in it, or they can choose between the schemes run by 14 different authorised pension fund managers. All of these offer personal pension plans, funded by monthly contributions out of pay pack- ets, with freedom to move from one mana- ger to another. They have done well and are popular. Tax allowances smooth their paths. More than 90 per cent of those in the old social security system have switched into them. Young people coming to work for the first time are required to join one of them. The burden of a state pension scheme will soon be off the Government's back. Our own state pension scheme was supposed to be funded out of contributions, back in the days when Lloyd George was promising everyone ninepence for fourpence, but that link has long since snapped, which is part of Peter Lilley's troubles. Chile shows him how to mend it.
Don't call us
WHEN THE bankers met in secret to wrap up the billion package for sterling, they decided that their plan must have a code name. Any suggestions? Well, said a bright spark from the foreign exchanges, since this was hush-hush and would have to be fixed up on the telephone, why not call it Opera- tion Squidgy? The Bank of England over- ruled him.
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