Britain on the brink of second credit crunch, Bank of England Governor warns

UK Telegraph

Britain is on the brink of a second credit crunch, the Bank of England warned as it slashed its growth forecasts for the economy and raised the prospect of a double-dip recession.

The eurozone crisis has left UK banks unable to raise the funding they need to make loans to businesses, evoking the spectre of the crunch that followed the collapse of Lehman Brothers.

And on one critical measure — the cost of insuring banks against going bust — lenders are already facing tougher conditions than at the height of the crunch, the Bank said.

Sir Mervyn King, the Bank’s Governor, said that because of the eurozone crisis, households, companies and banks face a period of extraordinary uncertainty, including a possible slide back into recession. “There is weakness over the next few quarters. No one can know what precisely the outcome will be,” he said.

“In the last three years, we have seen extraordinary events. Who knows what’s going to happen tomorrow, let alone next month?”

Yes, who knows. Though it seems everything is so often on the brink, a collapse of any sort doesn’t happen with every little intervention or promise of salvation restoring enough confidence to continue. But it does seem the cancer is spreading and becoming the situation in Europe terminal.

The report warned that if banks cannot find sufficient funds it will “curtail the amount they lend to businesses and households, through reductions in the availability of credit or increases in loan rates”.

The Coalition has tried to enforce a rise in loans, but banks must raise a further £200 billion-£300 billion next year just to maintain their current lending levels.

Averting a second credit crunch will depend on whether the eurozone can find a solution to its debt problems, Sir Mervyn said.

I can’t see any solution apart from massive intervention from the ECB. Sure this would help bring some resolve to the Eurozone debt crisis and pressure is mounting on the central bank to ratchet up its support. Failing that, the prognosis don’t look good. Even with significant ECB intervention, the austerity to match will be beyond unpopular.

Ah yes,Mr Cameron and Nick "The Bootlick" Clegg,Take a bow!! How can we afford to give millions upon millions in aid and foreign bailout for the EUand yet wee are floundering in our own debt???

Its official,this country is screwed!