News Article

George Osborne reveals measures to 'defend our economy'

Published 15 June 2012 by

The Bank of England Governor, Sir Mervyn King, said that the "industrialised world have thrown everything bar the kitchen sink" at the economic crisis, but now "bolder action" is needed.

This comes as the Chancellor George Osborne reveals "new firepower" - a £140bn emergency scheme that's designed to kick-start our economy. It's hoped it will help Britain steer clear of a second credit crunch, which could be caused by the ongoing Eurozone crisis.

"We are rolling up our sleeves and doing everything possible to protect British families and firms," said Mr. Osborne.

These new measures follow other attempts to salvage the economy, for example the £325bn quantitative easing scheme and cutting interest rates to a record low.

The Chancellor announced the "funding for lending scheme", which will be run by the Bank of England - which means that it won't add to Government borrowing. It's intended to "provide funding for an extended period of several years, at rates below current market rates and linked to the performance of banks in sustaining or expanding their lending."

This comes alongside another scheme that could let high street banks "swap" their assets temporarily with the Bank of England. In return, they get money they can loan to customers. This could support up to £80bn in new loans, according to estimates. Another emergency scheme will offer six-month liquidity to banks in sections (or 'tranches') which will not be less than £5bn per month.

George Osborne also warned that Greece could be required to leave the Euro in order for the economic crisis to end. He said "The political paradox Europe faces right now is this: some or all of these things are needed for the existing countries in the Eurozone to make their currency work, but it may take Greek exit to make it happen." He said that Greek exit might be effective to "prevent contagion."

He added that "the worst case for everyone would be exit without a sufficiently ambitious response. But carrying on with the current uncertainty and instability is not much better. A time for decisions has come."

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