MAGGIE PAGANO: EU offers an olive branch for Truss at Prague summit

Liz Truss will be in Prague today for the first meeting of the European Political Community, a brand new forum aimed at strengthening security and prosperity across the continent.

Agreeing to join the grouping is a big shift in thinking by the Prime Minister and her foreign office advisers.

When French president Emmanuel Macron first mooted the idea back in the spring, it was given short shrift by then PM Boris Johnson.

Talks: Prime Minister Liz Truss was on the money in deciding to join her European colleagues at the Prague Castle summit, and be in the thick of these deliberations

Along with Johnson, many were sceptical that this was another of Macron’s grand gestures to slow down the membership of eastern European countries and indeed Ukraine – and a smart way to make them feel included at the top table.

Others dismissed it as yet another talking shop for waffling politicians.

But times have changed. Russia’s war in Ukraine has stepped up, the energy crisis has deepened and inflation has ripped through the continent like wildfire.

As the latest S&P Global’s PMI figures for the eurozone and the UK show starkly, we are in this together and we are all caught between the twin pincers of higher inflation and rising interest rates.

The numbers for Germany are particularly gloomy, pointing to an early recession and weaker global demand.

It’s no secret that the top priorities for debate between the heads of state from the 44 countries – 27 EU members, potential members and outliers like the UK and Israel – are Russia’s war in Ukraine, finding ways around the energy crisis and the deteriorating economic situation.

We share common concerns: it’s not only sterling which has crumbled against the dollar. So has the euro as Germany’s once-mighty export book weakens further.

Also on the menu is migration and mobility, another sticky issue which will only ever be sorted when European countries – together with international bodies such as the UN – agree to some form of policing of their own borders and seas.

Which is why Truss was on the money in deciding to join her European colleagues at the Prague Castle summit, and be in the thick of these deliberations.

These are the trickiest of problems so it’s essential that the UK is present at the table: Brexit never meant a return to splendid isolation but a reworking of relations with our friends and neighbours.

The summit also gives Truss a chance to engage in crucial backroom chats with Macron and the heavies from Brussels who will be attending on the sidelines, including European Council president Charles Michel, about some form of agreement on the Northern Ireland protocol, which now looks more promising than ever.

In terms of easing trade, as well as the political optics, this is the right thing to do. In another sign of the warmer mood music crossing the Channel, Truss has offered to host the next summit in the UK.

Coming after the battering she has received from the Press and her own party at Birmingham, she might find European leaders a rather nicer, friendlier escape.

Even if the sceptics are right and Prague turns out to be another talking shop, it’s better to be on the inside than out.

Better to jaw-jaw than war-war.

Totting up the gilts bill

Shadow Chancellor Rachel Reeves should know better.

Reeves suggests the Bank of England, where she once worked, has spent £65bn of taxpayers’ money in propping up the gilts market to prevent pension funds from collapse. 

This is incorrect, and the often impressive Shadow Chancellor does herself a disservice by the claim.

The Bank has now spent just £3.7billion via the facility, out of the total £65biliion which had been set aside. 

What’s more, it stopped buying more long-dated gilts on Monday, confirming that its dramatic intervention last week has succeeded in stabilising the market, with gilt yields coming down.

However, the Bank is not being complacent and stands ready to spend up to £5billion a day until October 14, if necessary.

More pertinently, Reeves should be questioning the changes in accounting practice which led to so many defined benefit pension funds chasing fool’s gold in the gilts market.

As an economist, she knows it is not possible to increase returns and decrease risk.

Tesco pay rise

Along with most supermarket groups, Tesco is raising pay for its workers for the second time this year as they battle to attract staff. That’s a good move.

The more worrying sign is that Tesco chief executive Ken Murphy says shoppers are watching every penny to make ends meet.

And inflation shows no sign of easing. The phrase ‘When the going gets tough, the tough go shopping’ may be out of date.