Latest from Coffee House

The campaign to keep Greece in the euro has resulted in five years of groundhog days. The unfortunate country seems to be forever approaching a day of repayments it cannot afford. Ministers and diplomats assemble to thrash out a deal. Meetings collapse in bad temper, and markets sink. Then, at the eleventh hour, a deal is somehow forged. Greece agrees to reforms which seek to cut spending and balance the books in return for billions of pounds of bailout cash. Markets rebound. The money is paid, the debt repayments met. And then all starts to go wrong again. A few months later we are back where we began. Anyone who hoped the election of Greece’s Syriza government in January would break the cycle has been disappointed.

It used to be that the most annoying thing in academic life was political correctness. But a new irritant now threatens to supplant it: the scourge of correct politicalness. The essence of correct politicalness is to seek to undermine an irrefutable argument by claiming loudly and repetitively to have found an error in it. As with political correctness, which seeks to undermine arguments by declaring the person making them a bigot, correct politicalness originated in the US. But it now has its exponents here, too. Foremost among them is Jonathan Portes. Portes’s career recalls that of the character Kenneth Widmerpool in Anthony Powell’s Dance to the Music of Time.

After months of escalating tensions over Ukraine and talk of a new cold war, Russia and the West could soon reach a surprising rapprochement. The eurozone economy is suffering badly and sanctions against Russia are partly to blame. Winter is also upon us, and that reminds every-one Vladimir Putin still holds the cards when it comes to supplying gas. The clincher, though, is that Ukraine is heading towards financial meltdown. Unless an extremely large bailout is delivered soon, there will be a default, sending shockwaves through the global economy. That’s a risk nobody wants to take — least of all Washington, London or Berlin. Sanctions against Russia were always going to hit western Europe hard.

Doom and gloom is all around. This is another winter, if not of discontent, then certainly of persistent grumbling. Optimism is as rare as a Scottish victory at Twickenham and, frankly, just as fanciful a thought. That, at any rate, is today's conventional wisdom. Fleet Street looks to a Triple Dip recession and ponders what side dishes will best complement the Chancellor's broiled reputation. And yet, and yet, I wonder - hesitantly, I grant you - if all this is quite accurate. Fleet Street, like Westminster, is often fighting the last war. Worse still, it tends to presume that what has happened will continue to happen and that present trends will last forever and a day and so on. No wonder the press is always surprised when this proves to be not the case. It is almost touching.

Now we know why David Cameron delivered his Europe speech on Wednesday. It’s time for bad headlines again: the GDP figures just announced show that the British economy is contracting yet again — by 0.3 per cent in the final three months of last year (see above graph). Now, you’ll hear a lot of people tell you today that quarterly data does not matter. The ONS say this is a fallback from the Olympics, which sucked economic growth forward. And they’re right: the ONS usually revises quarterly data, often dramatically. What matters more is the long-term trend, and this is pretty appalling. It now seems inarguable that Britain is going through the worst recovery in history. Slower and longer even than the 1930s.

Employment has almost entirely recovered to its pre-recession peak, according to today's new figures. Total employment for May to July stood at 29.56 million — up 236,000 on the previous three months and just 12,000 shy of the 29.57 million peak of April 2008. This recovery is thanks to the expansion of the private sector, which has added over a million new jobs in the last two years, and now employs 381,000 more people than it did before the crash. Public sector employment, meanwhile, has been cut by 628,000 since the coalition took over, and is now at its lowest level since 2001.

The ‘word of the year’ for 2011 is already featuring prominently in 2012. Yep, the ‘squeezed middle’ is the focus of the Resolution Foundation's latest report, which they launched in central London earlier today. It’s a fascinating and nicely presented study, and I’d recommend you read it in full: this think tank really is very good at choosing the most revealing metrics to bring some clarity to an often vague debate. But, in the meantime, here are some of the things that stood out to me from today’s event:   1. The squeeze started long before the recession.

Thanks to the tremors along Westminster's grapevine, we already knew that today's OECD Economic Outlook would make for pretty dreary reading. But now that the report is actually out, we can see the organisation's numbers for ourselves. The headline point appears to be that the eurozone is in, or is facing, ‘mild recession’. Or to put it in graphic form: And the current situation isn't look particularly encouraging for the UK either. The first heading in the section on us reads ‘The economy is weakening sharply’. And a subsequent pair of graphs predicts, first, that we'll experience a mild recession of our own across the next two quarters, and then that unemployment will keep on rising to a peak in 2013.

Well, so much for that. The FTSE 100 fell as much as 1.7 per cent this morning, while overnight the euro and Asian stock markets tumbled, after Europe’s leaders announced their grand 2-trillion-euro plan over the weekend to drag the Eurozone out of the mire. It appears the markets are well past the point of believing that political leaders can get us out of this mess. The consensus is that the plan is not concrete enough. Of course, equities may recover a bit later, as they have been prone to do in past days. But the whipsawing itself is the worst sign of all; stock investors and retail-end funds are confused, panicky and probably still in denial.

It's time to warm up the printing presses. When growth evaporates and governments feel politically unable to cut spending or raise taxes, there's only one tool left: printing more money. We can expect more of it soon. As James says today, Osborne believes he has created the conditions where the Bank of England can do some more Quantitative Easing and it could start as early as next month; an unusual move, given how high inflation is. But the Bank is (as ever) forecasting a return to the 2 per cent target soon – and may now claim that economic weakness makes an undershoot likely. And so (the logic will run) it’s time for more QE so as to keep inflation to target. The other arguments for QE are harder to make.

Tieless, Alistair Darling appeared on Marr this morning to discuss his memoir. As with so many of these New Labour autobiographies, there was the strong whiff of a therapy session. At one point, Darling said "if Gordon is listening to this" before remarking that he still felt a huge amount of "residual loyalty" to him. It is not news that the Brown government was dysfunctional. But it was striking that Darling did not dissent when Marr suggested that under Brown, Labour had – collectively – not been fit to govern.

There are plenty of pressing issues at the moment, but two in particular stand out: the cost of living and youth unemployment. Ed Balls lost no time in latching onto the first issue. On becoming shadow chancellor, he immediately attacked the government’s VAT rise and benefits changes, which he judged to be the main contributors to rising inflation. It has been a  successful tactic, sustained by rising inflation and determined political pressure. Now Balls seems to be turning his full gaze at youth unemployment. In article for the News of the World, Balls launches his campaign to save "Britain Lost Talent". At the root of this is a plan to create 100,000 new jobs funded by a £2bn tax on bankers’ bonuses.