LOW interests rates ‘risk sparking a new crisis’ across Europe, the Bank of International Settlements (BIS) warned in its annual report released yesterday.
The BIS further warned that historically low interest rates are threatening to make the global economy ‘permanently unstable’.
Jaime Caruana, General Manager of the BIS, at the Bank’s Annual General Meeting on Sunday said: ‘Seven years on, the great financial crisis still casts this long shadow on the world economy.’
He added: ‘Consumers, firms and banks in crisis-hit economies are still repairing their balance sheets and grappling with an overburden of debt.’
In its annual report, BIS warns: ‘Debt, both private and public, continues to rise while productivity growth has further extended its long-term downward trend. There is even talk of secular stagnation.’
UK interest rates have been at a historic low of 0.5 per cent for the past five years.
Turning its attention to Britain’s rapidly increasing housing bubble, the BIS warns that the housing market has become ‘unsustainably buoyant’.
Meanwhile adding to the pressure on the housing market, Britain has become the third worst country in Europe for building new homes.
Only Luxembourg and Switzerland are building fewer homes than Britain.
According to new research, when you compare the growth in population in the UK to the amount of new homes built, there is a serious deficit.
The chief executive of Countrywide which produced the research said that the period of economic crisis in Britain was not adequate in explaining the lack of new homes being built as the decline in construction predates the crisis and then continues through it.
Grenville Turner said that we ‘should not disguise the fact that the UK has failed to build the required number of homes over a much longer period of time.’
• Deepening the European economic crisis, private equity flotations have risen to their highest level of all time, signifying a rise before a extremely sharp fall.
Across Europe 33.4bn euros (£26.7 billion pounds) worth of private equity flotations has been launched in the first half of the year alone, that is a total of 31 separate flotations.
Last week, one such private equity flotation, the UK’s AA roadside rescue service, slumped when it was floated at £1.3bn on the London Stock Exchange.
AA is not the only UK flotation to flop, Saga, which deals with insurance in the UK, also suffered heavy losses after being floated, its share price losing 8.4% of its value.
When AO World, the online kitchen appliance and TV retailer, floated in February, its shares rose by more than 33% on the first day of trading, but have now been trading below their listing price for over two months.
Pets at Home collapsed 14%, Just Eat was down 6.6% and Bagir Group collapsed by 69%, leaving investors stunned.
The UK initial public offering (IPO) market has accounted for almost half of all private equity European exits in the first half of the year.
