A slew of bad news from Britain this week has the potential to substantially impact the United States. While much of the public’s attention is focused on the country’s unceremonious exit from the World Cup, the world’s central bankers said Britain’s mountain of debt could leave the country powerless to launch another rescue bid in the wake of a fresh financial crisis. The group, which comprises the Bank of International Settlements, presented a frightening picture of the impact of a second banking emergency on heavily indebted nations such as Britain, The Independent reports.
According to the paper, The Bank of England’s Governor, Mervyn King, has estimated that the Government has pumped as much as ?1trillion ($1.5 trillion) of taxpayers’ money into the banking system. Billions of pounds were spent part-nationalising the Royal Bank of Scotland and Lloyds Banking Group, as well as fully nationalising Northern Rock. Measures such as the “special liquidity” plan propped up other lenders and prevented the system from freezing up.
To add to the misery, fresh data from the Bank of England suggests housing is headed for another slump, as gains made in the second half of last year are on track to reverse themselves by the end of 2010, with a “double dip” recession in the housing market now “more likely than not”, the paper reports.
All of this comes on the heels of a controversial emergency budget passed by the government last weekend, and supported new Prime Minister David Cameron, that includes the steepest budget cuts and austerity measures since World War II. Unions and other Labour Party constituents reacted angrily to the plan with Bob Crow, head of the National Union of Rail, Maritime and Transport Workers (RMT), referring to it as “fiscal fascism.”