Liz Truss She became Prime Minister of the United Kingdom on September 6 and in just 21 days in office the country seems to have accumulated a series of catastrophic misfortunes. She was formally commissioned by Queen Elizabeth II at Balmoral Castle in Scotland, not Buckingham Palace as usual. Two days later the queen passed away.
On Tuesday, September 27, Truss completed 21 days at Downing Street. It was then that the worst possible forecasts were released: the pound sterling experienced a flash crash -as short periods but with sharp drops are known- and in just 20 minutes it sank until it was close to parity with the dollar.
As if it were a curse, in the ears of the British the last words that Boris Johnson spoke in Parliament: “See you later, baby”. Those with which he paraphrased the character of Arnold Schwarzenegger from the science fiction film Terminator 2: Judgment Day (1991).
“Hasta la vista, baby”: This is how Boris Johnson said goodbye to Parliament.
He has assured that he leaves satisfied because he considers his mission largely accomplished.
He tells us from London @DiegoArizpeleta
? https://t.co/aNlG2IlBhB pic.twitter.com/up80tiJY56
— TVE newscasts (@telediario_tve) July 20, 2022
And it is that the United Kingdom seems to have imploded. The worst forecasts anticipate that the British currency will lose parity against the dollar in November and, from then on, will continue to lose value against the US currency.
It is worth remembering that the british voted in favor of ‘brexit’ with the conviction that they would take control and they would become a stronger country if they managed to throw off the yoke of Europe. Well, the exact opposite seems to be happening. And now that they are no longer under the protection of Brussels, they have no right or access to aid from the Twenty-seven. If they want to overcome the crisis in which they are immersed, they will have to do it by themselves.
[Por qué el Reino Unido de Liz Truss no se parece en nada al de Margaret Thatcher en 1979]
downgrade
Confidence in the country’s economic viability was shaken after last Friday’s statement by the Truss government announcing a significant tax cut plan, the largest since 1972. The possibility that the tax cuts have not finished – as indicated Kwasi Kwartengthe British Chancellor of the Exchequer, added fuel to the fire.
“The market reaction to this news has been devastating”pointed out the analysts of Activotrade, who warned that “this collapse demonstrates the lack of confidence of the markets in the United Kingdom and a significant weakening of its financial strength”.
Liz Truss leaves Downing Street in a photo taken on September 23.
Reuters
Since rumors began to circulate about the Truss government’s response to the energy crisis, the yield on the 10-year bond has climbed more than 84 basis points, according to data from manager Schroders. “The huge additional fiscal stimulus is likely to push up inflation more than growth, which will be less helpful to the treasury, as it will lead to more indebtedness,” these experts say.
To some investors too they are concerned that the rating agencies could downgrade the UK’s credit rating.
[El gabinete diverso de Liz Truss: las tres carteras más importantes no las ocupan hombres blancos]
That is why the Bank of England brought out the heavy artillery on Wednesday, to contain the escalation of British debt and the collapse of the pound. The objective is that investors do not believe that the economic situation in the United Kingdom is similar to that of an emerging country, a comparison that analysts and market heavyweights have already made, according to Laura Piedehierro in EL ESPAÑOL-Invertia.
“Transform UK”
In her first speech as prime minister Liz Truss promised to “make Britain work again”. “We are going to transform the UK into a nation of aspirations, with well-paying jobssafe streets and where everyone has the opportunities they deserve,” Truss said on September 6.
Liz Truss with Kwasi Kwarteng, the British Chancellor of the Exchequer.
Reuters
He also had words of thanks for Boris Johnson, whom he praised for having executed the ‘Brexit’ and whom, in his opinion, “history will remember as a prime minister of great importance”.
From the outset, Truss presented a bold plan based on growing the economy through massive tax cuts and structural reforms to boost private investment. “I will make the country work, build and grow”he emphasized.
[Opinión: Liz Truss se enfrenta a una tormenta perfecta]
However, his plan has caused the British pound to hit its all-time low against the dollar on Monday. A collapse that is due to concern about the tax cut, but also to a summer of political uncertainty after Johnson’s resignation and the economic difficulties that ‘Brexit’ has brought.
The situation of the British debt and the pound “has become something akin to an emerging market debt crisiswhen foreign investors lose confidence in a local government and sell both the bonds and the currency at the same time,” the experts point out.
Truss’s first 21 days at Downing Street could not have been more catastrophic. There were those who compared her to Margaret Thatcher, but the new ‘tory’ leader is far from the ‘iron lady’. In fact, some international analysts referred to her rather as the ‘tin lady’. It’s early days to tell what Liz Truss is made of, but it’s in her best interest to be resilient and show nerves of steel because, today, the UK is in a critical situation.
