THE BANK of England and the European Central Bank were yesterday paralysed in the face of the rapidly deepening crisis of the world capitalist economy.
The Bank of England Monetary Policy Committee (MPC) voted to maintain the official Bank Rate paid on commercial bank reserves at 0.5 per cent.
The MPC also voted to continue with its programme of asset purchases totalling £375 billion, financed by the issuance of central bank reserves, but not to increase it.
The MPC’s latest inflation and output projections will appear in the Inflation Report to be published at 10.30am on Wednesday 8th August.
Meanwhile, rumours were sweeping the city that the government was poised to completely nationalise the RBS, to compel it to lend to small and struggling businesses which are in danger of going under.
Figures on Wednesday showed an alarming decline in factory output in the eurozone, and the Bank was already under pressure to take emergency measures to kickstart a recovery after output figures, released since the MPC’s July meeting, revealed a sharper-than-expected decline in output of 0.7 per cent.
Fears of Britain heading into an unprecedented ‘triple-dip’ recession were exacerbated by June’s GDP figures and have led to calls for further monetary stimulus from the Bank of England.
These calls for help were all ignored by the do nothing bank.
The ECB held a press conference just 90 minutes later but was unable to produce any proposal to deal with a situation where Greece has run out of cash and Spain is unable to sell its debt and needs a 450bn euro bailout.
The European Central Bank has also kept its main rate at a record low of 0.75 per cent, after cutting it from one per cent last month.
Hopes were raised when ECB president Mario Draghi said it would do ‘whatever it takes’ to support the euro.
The press conference was billed as ‘crunch time for the euro’.
David Llewellyn, vice-chairman of the Banking Stakeholder Group at the European Banking Authority, said: ‘Expectations are very high, the markets recognise that past measures simply haven’t worked.
‘Above all, if nothing is done to lower and stabilise the borrowing costs of countries like Spain and Italy then their future within the euro must be in question.’
However, Draghi remained as silent as the grave, indicating a behind-the-scenes failure to agree on the measures to be taken by the major powers of the EU, France and Germany.
At a conference in London last week marking the start of the Olympics, Draghi said: ‘Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.’
The capitalist world is still waiting and will not wait for much longer.
Earlier this week, the Bundesbank, the German central bank, published an English translation of an interview with its president Jens Weidmann from a month ago.
It said that the ECB should be aware that its independence ‘also requires it to respect, and not overstep, its own mandate’.
Draghi yesterday said nothing, except: ‘Risk premia that are related to the stability of the euro are not acceptable and they need to be addressed in a fundamental manner. The euro is irreversible.’
He promised that the ECB ‘will undertake further non-standard’ measures, adding that ‘over the coming weeks we will design the appropriate modalities for such policy measures’.
The crisis, however, will not wait on the ECB.