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UK heading for even harder times under PM Liz Truss
Thomas W. Pauken II
British Prime Minister Liz Truss holds her first cabinet meeting inside 10 Downing Street in London, September 7, 2022. /CFP

British Prime Minister Liz Truss holds her first cabinet meeting inside 10 Downing Street in London, September 7, 2022. /CFP

Editor's note: Thomas W. Pauken II is the author of "U.S. vs China: From Trade War to Reciprocal Deal," and a consultant on Asia-Pacific affairs and geopolitical commentator. The article reflects the author's opinions and not necessarily the views of CGTN. 

The United Kingdom is expected to confront major challenges for the months ahead, such as double-digit inflation rates, dismal economic conditions and a fragile foreign policy agenda. Liz Truss was elected on Monday by Conservative Party voters to take charge as prime minister and to set the UK on the right path but the road ahead may not be easy for her.

Truss has also stumbled as the UK's former foreign secretary and she had rarely shown signs of demonstrating effective leadership, delivering brilliant solutions to complex problems and to inspire confidence as a crisis manager.

According to media reports, Truss is known for frequently changing her political positions when she finds it expedient to do so. She claims to follow the model of Margaret Thatcher, but Truss lacks the resolve to stay firm amid the pressing political crises that will swirl in the UK's future.

Additionally, Truss was known for making frequent blunders when she served as the UK's top diplomat when Boris Johnson was prime minister. She had taken a very confrontational stand against China and opposed a willingness to compromise in order to resolve the Ukraine-Russia conflict.

Not coincidentally, Truss changes her positions to follow the trends and adapt, but her foreign policy remains stubborn. Hence, her continued support for Kyiv may cause her own undoing.

Standing outside 10 Downing Street, Britain's newly appointed Prime Minister Liz Truss poses for photographers with her husband Hugh O'Leary, after delivering her first speech as Prime Minister in central London, September 6, 2022. /CGP

Standing outside 10 Downing Street, Britain's newly appointed Prime Minister Liz Truss poses for photographers with her husband Hugh O'Leary, after delivering her first speech as Prime Minister in central London, September 6, 2022. /CGP

Truss-Zelenskyy phone call

Prime Minister Truss has already broken precedent. The UK leader when starting their first day in office is commonly expected to dial the White House as their first phone call to a foreign leader as a symbol of strength on the UK-U.S. alliance. But this time around, Truss called Ukrainian President Volodymyr Zelenskyy first before ringing up U.S. President Joe Biden.

"Ukraine could depend on the UK's assistance for the long term," a UK government spokeswoman is quoting Truss as saying in her call with Zelenskyy, according to media reports.

Accordingly, the UK will continue to bear the consequences over the U.S.-led sanctions on Moscow and suffer from the deepening impact of London's decision to back Washington's agenda to contain China as well, which can have serious economic repercussions.

The continent of Europe is taking severe hits with shocking energy and food shortages, while the circumstances are getting much worse with each passing day. In recent days, Moscow announced that the state-owned oil & gas giant Gazprom would halt gas flows of Nord Stream 1 to Germany until the Western powers agree to "collectively" rescind their sanctions on Russia.

The announcement will hurt the UK economy, even though London is less reliant on Russian energy than the 27 European Union member states. British households and businesses have seen their electricity and gas bills rise over 80 percent compared to last October.

In response, PM Truss appears likely to announce plans on Thursday to impose an electricity price freeze for UK households, which would be set at 2,500 British pounds per year. Nevertheless, this would require London to spend about 69 billion pounds on subsidies and introduce another 30 billion pounds in tax cuts that would require the UK to pay an estimated 150 billion pounds to fund it in full.

Bailouts won't rescue the UK

Liz Truss is not the leader of Britain's Labor Party but by announcing plans for bail outs of the country's electricity producers and implementing price freezes that demonstrates desperation by London. The problems with bail outs can spark a chain of unintended consequences.

When companies discover they could collect public subsidies to pay their utilities bills, other businesses could request bail outs for different reasons. The government will have a tougher time to refuse offering future rescue packages.

By taking a closer look at Truss' Cabinet, we see contradictory strategies at play. Truss appointed the Brexiteer, Jacob Rees-Mogg as the UK's business secretary. Truss asked him to reduce business regulations and push forward on tax cuts as she believes will "boost business-led growth and investment."

This begs the question: How could Truss' support for pro-free market values not conflict with her big-spending and debt-ridden bail out plans? Additionally, many European electricity producers could cause a global financial crisis, similar to a so-called "Lehman event."

European energy companies are facing margin calls totaling an estimated U.S. $1.5 trillion in the derivatives market while many require policy support to cover them amid surging gas and power prices, Bloomberg cites Helge Haugane, vice president of Norway's energy major Equinor, as saying on Tuesday.

Truss not ready for impending "storm"

The UK and EU are walking into a dangerous precipice for the international economy, but Truss does not seem to be fully aware of all the challenges that await her.

"I will take action this week to deal with energy bills and to secure our future energy supply," Truss said at her first speech as prime minister.

"As strong as the storm may be, I know that the British people are stronger," she added, highlighting her priorities as the economy, energy and health.

Yet, the economic problems cannot be easily resolved. Truss could make adjustments by backing away from Washington over the sanctions on Russia in order to fix the energy problems but we can't expect that to happen. London and Washington are so closely linked that Truss has no liberty to turn against the White House.

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