THE decision by the government and Bank of England to pump more money into the British banking system was described as “paltry” by Labour this morning as concerns over the effect of the eurozone crisis mount ahead of this weekend’s elections in Greece. Chancellor George Osbore last night announced in his Mansion House speech that the Bank of England and Treasury would be giving more cheap loans to the banks and offering more liquidity through credit easing.
He blamed the euro crisis for Britain’s flatlining economy but insisted that the UK could withstand a collapse in the currency. In his response the Governor of the Bank of England Sir Mervyn King warned that the world economic situation is worse now than it was two years ago when the coalition government came to power.
But with Greeks going to the polls this weekend and expected to vote for parties opposed to its bailout austerity conditions there are concerns that the euro crisis will now get worse.
Mr Osborne hinted that the Greeks may have to exit the currency before the radical measures of integration needed to support the currency can take place.
And last night the German Chancellor Angela Merkel warned that her country alone cannot deal with the crisis and other countries such as Greece will have to fave up to reality.
But Mr Osborne’s efforts to shield the UK from the euro crisis were this morning described as paltry by Labour’s shadow chancellor Ed Balls.
He said: “I’m afraid the problem is that monetary policy and liquidity can’t solve this problem.
“At the Mansion House last night, it was as though the spirit of Philip Snowdon and Montague Norman was living on in the room. In the early 1930s in Britain, the Treasury said cutting spending faster and tax rises would boost private confidence and get the economy moving supported by the Bank of England. But it failed in the 1930s and it’s failed in the past two years as well.”
However, the extra liquidity for banks was welcomed by Tory Treasury select committee chairman Andrew Tyrie who had been pushing for it to come earlier.