Radar

After months of dithering amid failed attempts to find a private buyer, the Labour government admitted defeat and nationalised Northern Rock, the north of England institution that in September last year endured Britain’s first bank run for 140 years. Critics pointed out this was the first major bank nationalisation for 25 years and evidence of the government’s economic incompetence. Opinion polls show the government is lagging the Conservative opposition by around 10 points, with recent plans to alter the system of capital gains tax attracting further negative controversy.

Opinion polls had predicted a closerun general election last month, and so it proved, with the party of José Luis Rodriguez Zapatero, the Socialist prime minister, winning 43.7% of the vote (at time of going to press) after a hardfought campaign, but failing to secure an absolute majority. Turnout was high, at 75%. The economy, rising inflation (now 4.5%) and unemployment had been the main issues. Negotiations with smaller, regional parties are now expected as attempts are made to form a coalition.

European leaders continued to express their concern at the rising value of the euro, which over February rose beyond $1.51, its highest level ever as a consequence of growing international fears of a major US economic slowdown. German and French exporters in particular have said that the high valued currency makes exports to non-euro countries – including the UK – almost impossible. On the positive side there is growing evidence that the ECB’s proactive stance of injecting funds into the money markets over the past few months has averted the risk of the credit crunch worsening within the Eurozone.

Greek Cypriots elected a new president, Demetris Christofias, in place of hardline nationalist Tassos Papadopoulos, who has blocked reconciliation between Greek and Turkish Cypriots. The new president – who heads Akel, Cyprus’s Communist Party – has promised to restart negotiations with his Turkish Cypriot counterpart Mehmet Ali Talat, with both men apparently committed to Cyprus becoming a bi-zonal, bi-communal federation. However, Christofias’ left wing views, his past opposition to a solution, and political dependence on Disy, Papadopoulos’s party, have tempered optimism.

The EU, the US and Germany intensified their criticism of this tiny secretive state for its failure to make its banking sector more transparent (unlike Andorra and Monaco which have recently made changes). Berlin has been the most vocal, reflecting its ongoing investigation into high-level German tax evasion, and says the Duchy’s bank secrecy has made this harder to detect. It has threatened to block Liechtenstein from joining the EU’s Schengen Treaty later this year, enabling the free movement of citizens across Europe. Australia, France and Sweden are among other countries investigating money deposited in the Duchy.