Can Brown's Newfound Popularity Last?

[FarCenter]

http://www.spiegel.de/international/europe/0,1518,585882,00.html

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London especially was proud to have become a financial center on par with Wall Street, and was seen as the motor of the British economy. A quarter of revenues from corporate income tax came from the city. After the 2001 Enron scandal in the United States landed in court, even more American bankers moved to London, attracted by Gordon Brown’s “light touch regulation.” Reins were looser in London than perhaps anywhere else in the West.

The prime minister was among the bankers’ biggest fans. A year ago in a speech addressing representatives of the financial sector, Brown raved about the “new golden age” they had brought to the city, telling them, “I believe it will be said of this age, the first decade of the 21st century, that out of the greatest restructuring of the global economy, perhaps even greater than the industrial revolution, a new world order was created.”

For years Brown relied on that new order and it paid off. But now that the party is over, what remains as the mainstay of Britain’s economy is a monoculture financial sector. If the prime minister can be believed this time around, that sector will need to change, to be better regulated, less profitable, more solid, more boring. The gamblers will move on to Dubai, Singapore or the Cayman Islands, always looking for the next El Dorado.

What’s left is a country that enjoyed the credit excess to the fullest and is now waking up to one terrible hangover. No one knows how long it will last. Real estate prices, which had risen more quickly in Britain than in the US, are now falling. The unemployment count in Britain -- 1.8 million -- has increased more steeply than at any point in the last 17 years. Inflation is at 5.2 percent. Private households are among the most heavily indebted in Europe, and the budget deficit is increasing rapidly.

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