UK Preps up Economic Defence With $155bn Credit Firepower
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UK Chancellor George Osborne and Bank of England Governor Mervyn King have announced a £100 billion credit scheme aimed at stimulating the British economy amid fresh concerns that the eurozone’s “large black cloud of uncertainty” could lead to another severe credit crunch and high interest rates in Britain.
UK Chancellor George Osborne and Bank of England Governor Mervyn King have announced a £100 billion credit scheme aimed at stimulating the British economy amid fresh concerns that the eurozone’s “large black cloud of uncertainty” could lead to another severe credit crunch and high interest rates in Britain.
In a joint-proposal between the central bank and the Treasury, the “bank funding scheme” that will be launched within weeks will provide cheap long-term funding to banks to encourage them to lend to businesses and consumers – “to where it is needed in the real economy,” said Osborne.
Under the new “funding for lending” scheme, the Treasury could support an estimated 80 billion pounds ($124 billion) in new loans, while the Bank of England’s scheme will provide a minimum of monthly 5 billion pound tranches of six-month liquidity to banks.
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In his speech, the Chancellor said:
[quote] We are not powerless in the face of the euro-zone debt storm. We can deploy new firepower to defend our economy from the crisis on our doorstep. Funding for lending to the family aspiring to own their home and the business that wants to expand…The Government – with the help of the Bank of England – will not stand on the sidelines and do nothing as the storm gathers. [/quote]
Osborne also said that the situation in the eurozone is likely to get worse before it gets better.
According to the Guardian, the announcement was designed to shore up confidence before this weekend’s elections in Greece, largely seen as a possible trigger point for a new phase in Europe’s debt crisis.
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Yesterday, German Chancellor Angela Merkel dismissed calls for Berlin to share responsibility for other euro countries’ debt and rejected claims that Germany was not doing enough to stabilise the euro. Reiterating that Germany’s strength is not unlimited, Merkel said “the way out of the crisis in the eurozone can only be successful if all countries are capable of recognising the reality and realistically accessing their strengths.”
Sir Mervyn said the eurozone crisis had created a “large black cloud of uncertainty” over the global economy which could lead to a second slump since the start of the financial crisis in 2007.
Referring to early signs of a slowdown in China, India and other “previously buoyant emerging economies, he added that further action was imperative.
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