Wednesday, May 12, 2010

Crisis Far From Over

Now that the UK finally has a government which, for the short term, may well be stable it can be hoped that the ongoing local financial chaos can be abated.

However, as Mervyn King (Governor of The Bank of England) points out, the crisis is "far from over".

The Bank of England's quarterly inflation report predicts an increase in growth. However, it notes that conditions remain uncertain and that the pace of recovery will be dampened by the need for "substantial fiscal tightening" and a further strengthening of banks' balance sheets.

Mr King has been briefed on the fiscal plans of the new government, and has expressed satisfaction that there is a binding commitment to accelerating deficit reduction.

It should be remembered that Mr King has been reported as saying privately, before the election result, that whoever won the election would be so unpopular due to the spending cuts and tax rises to come that they would be out of power for a generation.

As Noel Coward once sang:

"There are dark days just around the corner..."

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