Key more confident on Europe, unfazed by polls

BUSINESSDESK: Prime Minister John Key has returned from European "slightly more confident" the region will "muddle through" its current crisis successfully, and convinced New Zealand is doing most of what European governments would do, if they could, for their economies.

In his first post-Cabinet press conference since returning from a week-long tour of European capitals, Mr Key also shrugged off the government's falling opinion poll ratings, saying his government was still polling the same levels of support as when it narrowly won last year's general election.

He also appeared to lay most of the blame for the government's forced backdown over increased class sizes in return for investment in teacher quality at the feet of new Education Minister Hekia Parata and the new chief executive of the Ministry of Education, Lesley Longstone.

While Mr Key declined to discuss the contents of his discussions with German Chancellor Angela Merkel, or Bank of England governor Mervyn King, he described writing a list of observations about the differences between Europe and New Zealand on the plane home.

Chief among these was a realisation that New Zealand's record of poor productivity improvements reflected in part that the country needed to improve "from a high base".

"The low-hanging fruit has been plucked," he said. "I'm just saying, compared to those [European] countries, the big advantage of New Zealand is it has many of those policy settings right."

He cited the integrity of the tax system, a "very flexible" labour market, "great" trade access, a relatively small bureaucracy, good infrastructure, sustainable levels of government debt, a single-chamber Parliament and a world-class public education system.

"If you look at the basic elements of New Zealand, it's pretty good. It's not the same as some of those other countries, which are very boxed in," he said.

"We just need very creative people and products that the world wants to buy."

His comments come ahead of this weekend's voting in Greece, after the debt-wracked country failing to elect a government last month.

The vote is effectively a referendum on whether to accept austerity policies and keep getting European Union bailout money, or to go it alone and potentially abandon the euro as its currency.

However, the 100 billion euro bailout package for Spanish banks, announced over the weekend, was an indication of how determined European politicians were to keep both the EU and the euro functioning.

Europe was likely to "muddle through", although it could be a "messy muddle", but it was important to recognise the negativity of English language media towards the EU and eurozone did not reflect the commitment in Europe to making the so-called European project work.

On polls showing a slide in support for the National Party to below 50% in recent days, Mr Key again drew comparisons with Europe, where most governing parties were "on their knees" by comparison.

"We are polling where we were on election night," he said, although Cabinet as a whole had learnt lessons from the education policy backdown, which he described as "the right idea, but the execution was poorly handled".

"We all need to take some responsibility for that, including myself," he said, although later acknowledged that similar advice had been rejected by his Cabinet in 2009.