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British Prime Minister Resigns amid Market Meltdown

Liz Truss becomes the shortest-serving prime minister in England's history after a rapid downfall resulting from her misguided economic plan.
British Prime Minister Resigns amid Market Meltdown

Liz Truss is expected to leave office as the United Kingdom's prime minister in the coming days. That tenure, which likely will fall short of 60 days, would give her a claim to being Britain's shortest-serving prime minister. George Canning, who is usually thought to hold the record. served for 119 days in 1827 until his death from tuberculosis, reports NPR.    

Liz Truss will have a claim to being the U.K.'s shortest-serving prime minister (NPR)

Excerpt from NPR: Truss had an eventful time in charge. Just days after she took office, Queen Elizabeth II died after 70 years on the throne. Truss presided over a national mourning period, speaking at the late monarch's funeral, and she traveled the nation with the new King Charles III. Soon afterward, Truss launched a "mini-budget" with her finance minister at the time, Kwasi Kwarteng. The plan would lower income taxes for the highest earners and cut some other taxes, while increasing spending. This upset the markets, as investors felt the plans weren't credible, and it forced several U-turns after just a few days. First Kwarteng was forced out, and now Truss has been defenestrated.
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According to Vox, the United Kingdom, not to mention the Conservative Party currently running it, is having a bumpy fall. So bumpy, in fact, that new prime minister Liz Truss has announced she will resign, after only six weeks in office.

"I cannot deliver the mandate on which I was elected," she said Thursday in brief remarks.

Why Liz Truss was UK prime minister for only six weeks (Vox)

Excerpt from Vox: Truss’s rapid fall from power came after she introduced Trussonomics, a plan for massive tax cuts aimed at Britain’s wealthiest, and then reversed course and apologized for all the economic turmoil the proposal created. That proposed “mini budget,” which also included a rollback of corporate tax hikes and a break on planned cost increases for national insurance, had sent the British financial markets into a weeks-long tailspin. On top of a deepening cost-of-living crisis, Truss’s plan sent foreign investors fleeing from the British economy, driving the country’s currency to a record-low value against the dollar. That economic chaos precipitated a political crisis: Truss’s grip on power slipped fast, as did public esteem for her Conservative Party.
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Conservative MPs hoping to succeed Liz Truss as prime minister are racing to find backers before a Monday deadline, writes BBC News.

Tory leadership: Hopefuls jostle for MPs' support (BBC News)

Excerpt from BBC News: Defense Secretary Ben Wallace has ruled himself out of the contest, adding he is "leaning towards" backing Boris Johnson. The former PM has not ruled out a dramatic comeback, months after being forced out after a Tory revolt. Candidates to replace Ms. Truss need support from at least 100 colleagues, limiting the contest to three. Rishi Sunak and Penny Mordaunt, who stood unsuccessfully in the contest to replace Mr. Johnson, are also seen as likely contenders to run again. So far, the BBC estimates that Mr. Sunak has the most MPs declaring their support, with 56, compared to 33 for Mr. Johnson and 17 for Ms. Mordaunt.
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In a related story from the Wall Street Journal, U.K. Prime Minister Liz Truss’s resignation is a stark reminder of how high inflation and rising interest rates have changed the game for politicians and narrowed their room to maneuver.

"What we saw here was the combination of the wrong fiscal policy at the wrong time—an unfunded commitment at a time when rates are going up," said Jonathan Portes, a professor of economics at King’s College London.

U.K. Government Is High-Profile Casualty in World of Higher Borrowing Costs (Wall Street Journal)

Excerpt from the Wall Street Journal: For the past decade, low inflation and ultralow interest rates gave governments around the world room to spend more and pile on debt without alarming investors. Those days are over. With central banks tightening monetary policy, political leaders are less able to borrow money without raising questions about how they will repay it, in part because higher borrowing costs make debt more expensive and in part because governments already loaded up on debt during the Covid-19 pandemic. Britain is a case in point. Debt as a proportion of economic output went from about 80% pre-pandemic to roughly 100% now. Crucially, this was going to be paid for by borrowing rather than spending cuts. That same plan a year or two ago might not have raised many eyebrows, economists say. This time around, however, the market reaction was severe.
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