Stop giving in to the markets

From today's Morning Star

Left economists advised governments to stop "kowtowing to the markets" today in the wake of a week of panic and turmoil following the US debt reduction package.

They hit out as David Cameron entered crisis talks with French President Nicolas Sarkozy to discuss doubts over the situation in the US and economic stability in the eurozone.

Left Economics Advisory Panel co-ordinator Andrew Fisher said: "There is a real concern that a further round of bailouts or quantitative easing will be demanded to prop up the markets, but this will only delay and exacerbate the inevitable collapse.

"Any public funds must be used to defend jobs and investment, not prop up overvalued assets and share prices."

Credit ratings agency Standard & Poor's lowered US creditworthiness down a notch to AA+ for the first time in the country's history on Saturday.

It said the cuts plan passed by Congress on Tuesday did not go far enough to stabilise the country's debt situation.

China, Washington's largest creditor called on the US to end its "debt addiction" and even suggested that the dollar may have to cede its position as the world's reserve currency.

Indian Finance Minister Pranab Mukherjee described the situation as "grave."

Mr Fisher said: "It is time for governments to stop kowtowing to markets - and with markets so weakened there has never been a better opportunity for democratic governments to regain some power and control.

"There is an urgent need for politicians to focus on the real economy - to tackle unemployment and to rebalance the economy away from the finance sector."