US backing is a coup for the Treasury?

Number 11 has some reason to be rather enthused by the visit of the world’s most important finance minister today.

Clearly Tim Geithner wanted to be diplomatic to his new hosts. But the scale of his ringing endorsement for George Osborne’s fiscal plans took aback many of us crammed in to the No 11 study, wondering if Britain’s new fiscal rectitude might grate with US plans for a further fiscal stimulus.

“I’m not worried about that concern in the UK. The chancellor has laid out a strong compelling direction for this country on the fiscal side, but I think they have the right balance,” said Secretary Geithner.

The US is pondering a further 1.5 per cent of GDP ‘mini stimulus’ at a time when in Britain all elements of economic fiscal support are being withdrawn.

In the past at G20 meetings Mr Geithner has sounded a little frustrated at the lack of support for growth in Europe, for example from the then German finance minister complaining about ‘crass Keynesianism’.

So it is small wonder that the backing of the US Treasury Secretary is viewed as a significant coup at the UK Treasury.

The former, now shadow Chancellor, Alistair Darling, today tore into the coalition government over the fact that many of the efficiency savings announced earlier this week are nothing of the sort. The cuts are very real actual spending cuts that have almost nothing to do with waste.

But the new Treasury insiders are not stopping at Britain. One central calculation is to export deficit hawkery through all the international institutions, through Brussels, and at crucial upcoming G20 talks, and probably at the World Cup too, if it were possible.

This clearly goes well beyond the £6.2bn in the UK. In some ways it is conveniently hitching on to the existing direction of travel. Italy this morning joined Ireland, Portugal, Spain, and Greece in announcing significant austerity through public sector pay cuts.

So Britain’s cuts agenda can no longer be seen in isolation. It is very much en vogue across Europe. And even across the Atlantic where they plan even more Keynesian borrowing boosts, they are supportive of the UK’s attempts to shrink the deficit fast.