Brexit has been weakening the island kingdom economically and politically for six years.
(Photo: AP)
London All good things come in threes, you could say. With Rishi Sunak elected Prime Minister, is the political chaos in London over? Although the financial markets initially reacted calmly to the third British prime minister in three months, it is still too early to sound the all-clear.
It’s good that after Liz Truss’ fiscal zigzag course, things are calming down in chaotic British politics. Judging by his time as finance minister and his previous announcements, a Sunak government is likely to do everything to restore the confidence in the markets that was destroyed by “Trussonomics”.
In concrete terms, this means that taxes are more likely to be raised than lowered. Government spending will be cut rather than increased. Treasury Secretary Jeremy Hunt, who is likely to remain in office under Sunak, has promised that it will not be as bad as the bitter austerity period that followed the 2008 financial crisis.
But that’s not all. If Sunak and Hunt want to reduce the share of government debt in gross domestic product (GDP) in the medium term, they will hardly be able to avoid severe cuts in social spending.
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The new wave of austerity hits a country whose public services have been underfunded for years and where real wages are falling painfully in the face of double-digit inflation. New conflicts, also within the ruling Conservative Party, are therefore programmed. And at some point the markets will also ask where future economic growth will come from.
Brexit is the open wound of the British economy
The new government will have its hands full relieving Britain’s acute woes, leaving little time to heal the country’s chronic ailments.
This means above all Brexit, which has been weakening the island kingdom economically and politically for six years. Only if Sunak succeeds in gradually correcting this historical error through a pragmatic course can the kingdom really recover.
More: Rishi Sunak becomes the new prime minister – He is popular in the markets but distrusted by the people