Chancellor George Osborne has admitted that the UK’s economic recovery will be a lot more difficult and take a lot more time than was originally hoped.
The statement comes after the government’s spending cuts were criticised by Shadow Chancellor Ed Balls when he expressed severe concerns over the speed in which spending is being cut. Osborne responded to the criticism by saying the plan was keeping the UK’s banks safe from the crisis. He disclosed his opinion that the world economy was in the worst condition since 2008. He also suggested that the markets are finally realising that economic recovery around the globe will be a longer and harder process than anyone expected. He argued that the austerity plan by the government was well thought out, developed and rehearsed and that it would protect UK banks. He went on to say that tests conducted on the Bank of England, the Financial Services Authority and the Treasury showed sufficient funds in reserve to cope with the present uneasy markets. In addition, he highlighted the fact that, although the market is becoming increasingly volatile, people are still buying shares in the UK government which conveys that people still trust us.
In addition to his defending of UK government plans, Osborne also spoke about how other countries in Europe should deal with the eurozone debt crisis. He believes that the eurozone would benefit from combining all the debt and paying it off equally. However, Germany is strongly opposed to this having just recovered from its own financial crisis.
Mr Balls accepted that the UK had made the right decision to not change to the euro but he challenged the chancellor’s claims about the UK economy, arguing that Mr Osborne was not facing up to its true condition. Considering recent reports, Mr Balls may have a point. On Wednesday the Bank of England reduced its prediction for growth this year to 1.5% from 1.8%. It also disclosed expectations of a 5% increase in inflation this year.
Mervyn King, the Bank of England’s governor has stated that the majority of risk to the UK economy is from other countries mainly America and the eurozone.
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