The emerging race for the leadership of Labor is shaking the financial markets

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But the line of candidates on their own behalf caused a shake-up in the financial markets in the last few days, and the fear that Britain will only sink into an economic crisis and political infighting, with no chance of getting out. The yields of the British bonds for a period of ten years have already crossed a historical level of two decades, and now stand at 5.2%. Those of the bonds for 30 years have also risen to records not recorded in nearly three decades. The markets fear a budget imbalance and a fiscal rampage that will deepen the country’s deficit, causing it to become insolvent. The newspapers and the media do not take their eyes off the bond markets, which have already proven that they can “oust” a prime minister as punishment for wrong policies.

Three possible candidates for the position

The current leader of the rebellion, former health minister Wes Streeting, did little to calm spirits in his first statement as part of this week’s showdown. Streeting, who resigned last week and announced that he no longer had confidence in Starmer’s leadership, proposed in an interview to return Britain to the European Union. He promised that under his leadership, Britain’s ties with Brussels would be strengthened, until “eventually we return to the Union”. Ten years after the Brexit referendum, and after the country’s political system dealt with it to the hilt, for the public’s perception, the statement was a bit exaggerated in the opinion of many. Yesterday (Sunday) he already partially retracted it.

Meanwhile, the rebels in Starmer are biding their time to allow one of the party’s most publicly appealing candidates to run for office. Andy Burnham, the mayor of Manchester, will be forced to face the Reform Party candidate directly next month and get a seat in Parliament, in order to compete in the intra-party competition for Labour, if there is one.

Burnham is considered part of Labour’s left wing, unlike Starmer, and his economic views so far have pointed in the direction of greater government involvement and a light hand on the fiscal trigger. Since it was revealed that he intends to run, British bond yields have jumped even more. In the past day, Burnham tried to explain that he would be “committed” to the fiscal responsibility rules of Starmer and Finance Minister Rachel Reeves, in an attempt to calm the markets. He clarified in an interview with the media that he did not say that the bond markets were “in conflict” with Britain.

“I said that politicians have put Britain on a course of conflict with the markets because of the way we lost control of our finances and our public spending, when we gave away control of energy, water and housing,” he tried to clarify. Burnham is also considered to be promoting closer relations with the European Union, but he is trying to avoid the issue due to the local elections in the district where two-thirds voted in the referendum in June 2016 in favor of leaving the Union.

The third candidate is also from the more left-wing faction in the party. Angela Rainer had already served as Deputy Prime Minister and was considered a rising star in the ranks of the party, until it was discovered that the warrior for social justice had not properly paid taxes on a house she owned. Now, she announced, “matters have been settled” and she is ready to return to the public arena. She is considered a factor that scares the markets especially, after she expressed more left-wing positions than the others regarding government budgets.

The rise in British bond yields so far has “shaven” alone about half of the budget surplus that the Treasury has reserved for the next budget. Its fiscal margin has now shrunk to only about £9 billion, and it may be wiped out if interest rates continue to rise. It has not yet been clarified whether Starmer indeed Intends to step down as prime minister, or force Labor to try to oust him through a vote within the party and electing a replacement. Labor is not considering going to new elections at this stage, partly because its support has dropped significantly.