Howard Davies: Blue skies over Beijing as APEC hits town

MT DIARY: Comfort gives the Dutch courage. Swiss politics is on a roll. Do your dim sums, Mr Osborne.

by Howard Davies
Last Updated: 26 Nov 2014

The Dutch economy has had a torrid time since the crisis. It has still not recovered the ground lost then, and house prices have been falling since 2008. The growth rate was negative in the first half of the year, though slightly less so than feared. And van Persie is not scoring many goals in a declining team.

You would not guess any of this from an evening walk through the centre of Amsterdam. The cloggies have an appealing habit of keeping their curtains open and the lights blazing, so the passer-by can gaze admiringly at the 'School of Vermeer' above the mantelpiece and the edgy conceptual plastic art in the window. (I was not in the red-light district, honest.)Bourgeois city life does not come much better than this, with a bonus canal view.

Maybe that is part of the reason why there is less existential angst in the Netherlands and the rest of the eurozone than the figures suggest there should be. The professional classes are still quite comfortable, thank you, with a plump cushion of wealth to fall back on. That is true in Italy and France as well, where conditions are even worse. At least Dutch unemployment is manageable. One suspects these countries need a sharper wealth shock to force them to take a serious interest in reform.

So we have the odd situation where the big European country whose economy is doing best, the UK, is the one whose government talks most urgently about the need for more reform in product and labour markets.

I took a Swiss flight from Schiphol on to Zurich. Yes, the airline exists again, though the 'air' bit went bust. There is not much sign of stress and strain in Zurich, though the airport is eerily empty. I spoke at a conference at a congress centre high above the lake. Luckily, I had my back to the view of a group of out-of-season yachts pottering about in the winter sunshine, or I might have been distracted from my earnest message on the future of central banking. On the right day, the lake is stunning: after a raclette and a couple of glasses of dole, you can imagine you have 'passed over'.

Switzerland has recovered strongly in spite of the continuing travails of its banks, especially UBS. But immigration is still the big issue in the cantons. More than 23% of the Swiss population was born outside the country, with net migration running at around 1% of the population a year, way above ours in relative terms. I am sure Nigel Farage has pored over the details of their referendum vote in February, which, by the slimmest of margins, told the government to introduce quotas for migrants, including from the EU. That requires wholesale renegotiation of the country's relationship with Brussels (sound familiar?).

So, for the first time since William Tell (dididum dididum dididumtumtum), Swiss politics is vaguely interesting. Can another country cherry-pick its free trade and movement provisions with the rest of the Union, keeping the bits it likes, but squeezing out job stealers and benefit tourists? It may be that the Switzers find out the answer to that very relevant question first. The business people I met were not very optimistic.

There aren't many Polish plumbers or Romanian minicab drivers in Beijing. From the smell emanating from the drains around my hotel, they could use a few Jaceks and Tomeks, but the road signs would be a challenge to the man from Timisoara.

When I called in, the sky was APEC Blue, as they now call it. Obama had been in town for an APEC summit, and traffic had been restricted for days, belching factory chimneys had been closed down for the duration and coal-fired power stations given the week off. It worked, and Beijing's skies were beautiful. Usually, in the winter, Beijing looks as though it has been shot in black-and-white – not this time.

Also, for the first time in a little while, my financial interlocutors evinced some interest in the UK, and particularly London. The City has become a sizeable offshore centre for the renminbi and Mr Osborne has impressed them no end by issuing a gilt denominated in the Chinese currency (known as a dim sum bond) last month. I forbore to say that, given the stubborn state of the deficit, he needed to borrow as much as he could, from whomever, and that we needed a full-blown banquet, not a basket of dim sum. That would have been disloyal.

Back home, I observe an unusual phenomenon. If we leave UKIP out of account, as it is unlikely to find itself in government, all three main parties seem to think that they are going to lose. The Conservatives fear they will leech votes to Mr Farage and lose a material number of seats as a result. The Lib Dems have still not recovered in the polls and fear the loss of half their MPs, while Labour are in a red funk about the leadership and whether it has what it takes to win over marginal voters. So they are all in what psephologists call 'a bit of a tizz'.

Knowing how this will play out over the next six months is well above my pay grade. Yet every time I put out a paper on my airports review, I am challenged about who will have to decide (search me) and whether or not they have committed to implement whatever we recommend (of course not). People have to write something, I know, but the standard line of enquiry lacks some originality. Couldn't the hacks ask about my interesting views on interlining and the future of long-haul, low-cost flying? I can bore for Britain on both.

Howard Davies is the chairman of the Airports Commission. Follow him on Twitter at: @howardjdavies

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