Kenneth Clarke deserved some applause at the Tory Party Conference for his management of the economy, but whether he really merited a full four minutes of standing ovation is rather more questionable. Two pieces of news yesterday signalled problems on the horizon.
September's inflation figures showed that the UK does not meet the often- overlooked Maastricht Treaty criterion for inflation. To qualify for the single currency, inflation needs to be within 1.5 percentage points of the average of the EU's three lowest inflation rates. The average for Sweden, Finland and Luxembourg is 0.5 per cent. On any measure, British inflation is too high by comparison. It remains above the EU average, an average which is raised by wayward Greek inflation.
This explains yesterday's second noteworthy event. Spanish government credit is now as good as British government credit, probably for the first time. The yield on the Spanish government 10-year stock maturing in April 2006 dipped below the yield on Treasury 7. …