Chancellor Osborne and Bank of England Governor King announced a massive £140bn emergency stimulus package for ailing British capitalism on Thursday night.
Both were speaking at the Lord Mayor’s Banquet at the Mansion House.
However, yesterday’s new figures showed the UK trade in goods deficit continued to widen to £10.1bn in April from £8.7bn in March.
Chancellor Osborne warned that ‘no amount of competitive edge can protect this country completely from the financial storm raging around us.’
He added that ‘sterling doesn’t enjoy the dollar’s status as the global reserve currency, which means the UK is much more exposed to market sentiment than the US.’
He admitted that the public sector would have to bail out the private sector, saying that ‘in a period of financial stress, when private sector confidence is low, we can also use the credibility of the public sector balance sheet to support investment and the flow of credit now.’
He declared: ‘I can tell you today that the Governor and I will take coordinated action on liquidity and on funding for new bank lending in order to inject new confidence into our financial system and support the flow of credit to where it is needed in the real economy.’
He did not say how the banks would be prevented from just pocketing the cash as they have done up till now.
He claimed: ‘We are not powerless in the face of the Eurozone debt storm. Together we can deploy new firepower to defend our economy from the crisis on our doorstep.’
In his concluding remarks, Osborne said: ‘Of course, one thing that I think we can all agree on is that a resolution of the Eurozone crisis would do more than anything else to give the UK economy a boost…
‘I have argued for a year now that the Eurozone needs to follow the “remorseless logic” of “monetary union” towards much greater fiscal integration.’
He advocated ‘common Eurobonds’, a ‘shared backstop for the banking system to strengthen banks and protect depositors; and as a consequence, much closer collective oversight of fiscal and financial policy’.
Continuing to advocate sacrificing the Greek people, he said ‘it may take a Greek exit to make it happen. That is a decision for the Eurozone and the Greek people.
‘One thing is for sure: if exit is the chosen route then the Eurozone must have a very good plan in place to prevent contagion.’
He admitted that there was no such plan in place when he stated: ‘Britain will not take part in any banking union.’
Mark Serwotka, PCS general secretary, said: ‘These measures show that the government is desperate because their austerity policies are making things worse.’
Earlier, German Chancellor Merkel warned that ‘Germany’s strength is not unlimited’.
She added: ‘Seemingly simple ideas for pooling (debt) are not feasible constitutionally, and totally counterproductive.’
Her warning came as the interest on Spain’s bonds shot up to seven per cent and ratings agency Moody’s downgraded Spain’s government bonds to the lowest rating, Baa3, above junk rating.
