Could the Conservatives still win? They grabbed 306 seats last time on 36.1 per cent of the vote, against 57 seats for the Liberal Democrats on 23 per cent and 258 seats for Labour on 29 per cent. In theory, they need just 19 extra seats to win a majority of one. But that would mean an extraordinarily unstable government; John Major was just able to survive in the 1990s with a tiny majority but the new generation of ultra-rebellious MPs is almost unwhippable.
So a government would need a majority of at least 30 to be half viable. The Tories therefore need to win at least an extra 35 seats. The problem for them is that they are now at 35 per cent in the latest YouGov poll (down just 1 per cent on the last election), against 41 per cent for Labour (up 12 per cent), 10 per cent for the Liberal Democrats (down 13 per cent) and 9 per cent for Ukip, which remains remarkably popular despite David Cameron’s promise of a referendum on EU membership.
No wonder the political markets are predicting that Labour is by far the favourite. Of course, anything can happen. The Tories can still win. But for that they need to be much more ambitious and much more aggressive. Are they up to the fight? We shall soon find out.
EUROZONE CRISIS STILL REAL
It has become fashionable to declare the Eurozone crisis over, and of course it is true that the intensity of the problems has diminished. The bond markets and even credit rating agencies are relaxing. But some of the data coming out of Southern European countries is unbelievably grim, suggesting that once again the economic establishment has become appallingly complacent.
Take Spanish retail sales: they are down by 10.7 per cent year on year in December, a disastrous, great depression-style collapse. The rate at which sales are plummeting is accelerating rapidly; retail sales have now gone down for 30 months in a row.
It’s not all grim in Spain, of course, and exports have previously done very well. But there are other ominous signs: as Capital Economics points out, since July 2012, the euro has risen by 11 per cent or so against the dollar and by a similar amount on a trade-weighted basis. This is bound to hit exports, the one source of growth for many beleaguered Eurozone economies.
My point is not to exaggerate the Eurozone’s woes – after all, German confidence indicators are improving again and the debt can has temporarily been kicked sufficiently far down the road. But just as sentiment might have become too negative at the height of the crisis, investors and commentators have now over-compensated and concocted a largely imaginary recovery. The Eurozone is still very badly sick, countries such as France are in deep trouble, the Italian elections are looming and nobody really knows where any of this will end.