Liz Truss resigns as UK Prime Minister: updates and live news

That disavowal, measured by second-to-none swings in bond yields and exchange rates, mattered more than the vociferous departures of Mrs. Truss’s cabinet ministers or the concerns of conservative lawmakers that ultimately made her position unacceptable.

For this reason, world leaders, wracked with economic challenges, watching Britain’s turmoil with nothing but fun, worry about Britain’s own stability. Interest rates, energy costs and inflation are rising around the world. Labor unrest is spreading across borders. Non-British pension funds likely to encounter Same financial pressure that plagued Britain. The last thing leaders want is for Mrs. Truss’ problems to be a harbinger of other countries.

“I hope in any case that Great Britain will find stability again and move forward, as soon as possible,” said French President Emmanuel Macron, who recently repaired relations with Ms Truss after she refused last summer to call him friend or foe. It’s good for us, and for our Europe.”

Economists said Ms. Truss was right to say that markets are being driven by broader global trends than tax cuts. Central banks around the world are raising interest rates to fight inflation, which has been fueled by an increase in demand as the coronavirus pandemic subsides and gas prices rise due to the Russian war in Ukraine.

“The problems are by no means all that Truss does, but you should have known that the blame for everything comes from the region,” said Kenneth Rogoff, a Harvard economics professor and researcher in financial turmoil.

“What is really worrying now is that the situation in Britain ‘may be the canary in the coal mine as global interest rates continue to rise, especially since they are not likely to fall any time soon,'” he said.

Mrs. Truss has long been known as a rebel and free-market missionary in the tradition of Margaret Thatcher and Ronald Reagan. Her tax cut proposals put her among the leaders of major economies battling inflation. But she made no apologies for offending economic doctrine or the expectations of financial markets in pursuit of her vision of a “low tax, high growth” Britain.

“Not everyone will support change,” defiant Ms Truss said a week ago at the Conservative Party’s annual meeting, even though one of the tax cuts she had planned, for high-income people, had already been reversed. “But everyone will benefit from the result: a growing economy and a better future.”

Experts said the prime minister’s gross miscalculation was the belief that Britain could challenge the attractiveness of markets by passing sweeping tax cuts, without corresponding spending cuts, at a time of soaring double-digit inflation and soaring interest rates.

“It was a combination of the wrong fiscal policy at the wrong time – borrowing when prices were high rather than borrowing, as in 2010, when they were low,” said Jonathan Portes, professor of economics and public policy at King’s College London.

He cited what he called “institutional sabotage” by Ms Truss, and in particular the way she and ousted Treasury Secretary, Kwasi Quarting, broke the custom by announcing sweeping tax cuts without subjecting them to the scrutiny of the government’s financial control, Office of Budget Responsibility.

In that sense, he said, Ms Truss was following in the footsteps of her predecessor, Boris Johnson, who resigned as prime minister just three months ago after a series of scandals that led to the mass withdrawal of his ministers.

Mr Carting’s budget maneuvers have led many in the markets to suspect the government was engaging in some kind of financial deception, which will inevitably require massive borrowing to cover a budget gap estimated at £72 billion ($81.5 billion).

Mr Kwarteng, who studied the history of financial crises as a PhD student at Cambridge University, dismissed negative reversals in financial markets as a temporary phenomenon. Like Mrs. Truss, he is a believer in disruptive change. Together they were among the authors of “Britannia Unchained,” a manifesto of a free-market-style revolution in Britain after Brexit. Among other things, the British authors described them as “among the worst unemployed in the world”.

It is not yet clear when, or even whether, Britain can fully recover from this period of political and economic turmoil. On Thursday, as news of Ms Truss’ resignation spread, the pound rose against the dollar and yields on British government bonds fell.

Virtually all tax cuts planned by the government have been undone, and the next prime minister, regardless of his policy, will have no choice but to pursue a policy of spending cuts and strict fiscal discipline. Some fear a return to Prime Minister David Cameron’s dismal austerity in the years after the 2008 financial crisis.

“Rishi or someone else can stabilize the ship and calm the markets,” Prof Ports said, referring to Rishi Sunak, a former chancellor who ran unsuccessfully against Ms Truss and may seek to succeed her. “But it’s hard to see how, given the state of the Conservatives, how any Tory prime minister can repair the damage in the long run.”

Much of this damage is done to Britain’s once excellent market reputation. Economists began referring to Britain at the same time as financially misguided countries such as Italy and Greece. Former US Treasury Secretary Lawrence Summers told Bloomberg News, “I’m very sorry to say, but I think the UK is acting somewhat like emerging markets turning themselves into a sinking market.”

This is a modest regression for a country that in 2009 announced a $1.1 trillion emergency fund to rescue the global economy.

“If you were a US fund manager, you wouldn’t put Britain in the super-secure category you might have earlier,” said Jonathan Powell, who served as Prime Minister Tony Blair’s chief of staff. “It’s not about Britain’s standing in the world, but what category we put ourselves in.”