In an interesting keynote debate which also featured BBC economics editor Stephanie Flanders, Lamont said he was “worried about interest rates continuing indefinitely” and he added “I don’t think it’s inevitable there will be a massive increase in inflation but it’s a problem.”
Flanders said that when she visited Japan in January she was struck by the fact that Japan was “no longer a cautionary tale” as the UK is now forecast for lower growth than Japan achieved in its austerity period.
She also highlighted last year’s autumn statement from the chancellor as “another signal moment” which gave a grim assessment of the economy’s ability to grow: “I worry that it’s staying flat and we are losing capacity.”
Chairing the event, senior ITN newscaster Alastair Stewart turned to the subject of the Euro, at which point Lamont entertained the audience with his well-known Eurosceptic views.
Lamont recalled how at Maastricht a series of increasingly painful meetings about the creation of the euro included a moment when one of the European ministers tapped him on the shoulder and said to him, “Everything you say is right but the euro is going to happen.”
He said people should never underestimate that the euro is a highly political project and he likened it “rather like a lobster pot, something you can crawl into but can’t get out of.”
Flanders said the ministers should have listened to the economists who pointed out worst case scenarios such as a bailout or default on debt and for which no provision was subsequently made.
She emphasized the frustration felt by the US Treasury which “secretly feels that Europe has run away from the banking problems" and she added that “the US banks are felt to be well capitalised but not so in Europe.”
As for other markets, she said it was a turn of events that when she looked at the numbers the prospect of safe investment was more likely to be found in countries such as Brazil and Mexico rather than in Europe, where downgrades continue to dampen sentiment.
