Stabilising and strengthening the banking system is essential to a lasting global recovery, Ben Bernanke, chairman of the US Federal Reserve, insisted yesterday, as UK ministers prepared to announce a multibillion-pound aid package today to get banks lending again.
Stabilising and strengthening the banking system is essential to a lasting global recovery, Ben Bernanke, chairman of the US Federal Reserve, insisted yesterday, as UK ministers prepared to announce a multibillion-pound aid package today to get banks lending again.
Mr Bernanke said the £700bn fiscal stimulus package of the incoming Obama administration could provide a "significant boost" to America's floundering economy. However, he made clear in a speech to the London School of Economics that "fiscal actions are unlikely to promote a lasting recovery unless they are accompanied by strong measures to further stabilise and strengthen the financial system".
He said: "History demonstrates conclusively that a modern economy cannot grow if its financial system is not operating effectively."
The Fed chairman, who earlier met Gordon Brown for talks, described the US job market as being in "a very bad state of contraction" but held out hope of seeing some stabilisation later in 2009. "The global economy will recover but the timing and strength of the recovery are highly uncertain," he said.
The haemorrhaging of jobs continued yesterday as banking giant Barclays announced 2100 job losses worldwide in its investment arm, while another 2000 were said to be under threat with the merger of investment banks Merrill Lynch and Bank of America.
As many as 400 jobs were under threat at Nottingham City Council, up to 200 will go with the closure of a distribution site for Argos and more than 230 redundancies were threatened after administrators said they were seeking a buyer for failed Midlands clutch manufacturer AP Driveline.
The Prime Minister will today visit Paris for talks with President Nicolas Sarkozy. Tomorrow, he will meet German Chancellor Angela Merkel in Berlin - she announced a new £45bn stimulus package yesterday, while France has announced its own £20bn recovery plan.
This morning, Lord Mandelson will set out the UK Government's multi-faceted package to unfreeze credit, encouraging banks to lend to businesses. After a Cabinet meeting dominated by discussing the downturn, the Business Secretary said: "I'm going to deliver real help, which targets real need, which is going to make a real difference."
It is thought the government will underwrite up to £20bn of lending to struggling small and medium-sized businesses.
George Osborne, for the Conservatives, claimed the UK Government appeared to be belatedly offering a watered-down version of his party's proposed £50bn loan guarantee scheme. "Let us hope they will properly implement this Conservative policy rather than a pale imitation or else they run the risk of repeating the mistakes of their expensive temporary VAT cut and achieving nothing," said the Shadow Chancellor.
For the Liberal Democrats, Vince Cable said: "The government should stop messing around with stunts and ensure that the banks owned or part-owned by taxpayers operate as state banks, maintaining lending for the economy."
