Cameron and Clegg's Early Days

In early May David Cameron realized that the Conservative Party had not won enough seats to form a majority government. Rather than trying to form a minority government, he surprised many by forming a coalition government with the Liberal Democrats and their leader Nick Clegg, who had acquitted himself well in the U.S.-style debates against Cameron and Gordon Brown. With this eleventh hour Hail Mary pass, the new team formed a government and Cameron became Prime Minister, with Clegg serving as his deputy. In politics, business, and life in general, one cannot choose when they take center stage, but given the opportunity, this coalition led by Cameron and Clegg seems to be making the most of the opportunity to set the United Kingdom on a new course in these early days. They have been able to withstand grousing within their own parties and hold the center — for now.

In spite of being very forthright about the need for a real austerity program, containing spending, and raising taxes, Prime Minister Cameron has risen in the polls since taking office on May 11. “He has played a blinder,” says one senior figure from the opposition Labour Party. “The way he presents himself is extraordinary and we saw that to full effect when he was in Washington — he looks every bit the prime minister.” In the Guardian, Martin Kettle, an associate editor of the left-leaning daily, wrote an encomium to Cameron titled: “A man of grace - Cameron has been good for Britain.” Officials contrast the 43-year-old prime minister’s “decisive, inclusive, calm” style with the more chaotic regime of Gordon Brown, his predecessor. (Financial Times: July 26, 2010)

With decisive measures at home, high marks from his early visits to the United States and India, and an improving European economy as a backdrop, the new team’s coalition has a solid foundation as they move forward. The improved economy in Europe is certainly helping to restore confidence and we have seen both the Euro and the Pound Sterling rise markedly from their lows during the last 60 days. The president of the European Central Bank, Jean-Claude Trichet, offered a somewhat more optimistic assessment of the Eurozone economy on Thursday, saying that the bank stress tests in July were “an important step forward in restoring market confidence.” Mr. Trichet made the comments after the European Central Bank, like the Bank of England earlier in the day, left its benchmark interest rate at a record low. He said that he was not signaling plans by the European Central Bank to raise rates, and cautioned that growth was occurring in “an environment of uncertainty.” In previous months Mr. Trichet had used the phrase “high uncertainty.” The subtle shift comes after recent data, particularly from Germany, showed the European economy performing better than expected. (NY Times: August 5, 2010)

The recovery from the Great Recession remains fragile on both sides of the Atlantic, and political and business leaders will be judged on how well they move the economy onto a more sustainable growth trajectory. It is much too early to know if this coalition will achieve its goal of governing 5 years prior to calling for new elections, but for now the early reviews are solid.