BLBG:King Pessimistic On Euro-Area Crisis As Global Economy Teeters
Bank of England Governor Mervyn King said his vote for more stimulus this month reflected his concern on a deteriorating global economic outlook at a time when he’s pessimistic that Europe’s debt crisis can be resolved.
“What’s concerned me in the last several months, and why I voted for easing in policy, is the worsening in the position in Asia and other emerging markets,” King told lawmakers in London today. Another reason is that “my colleagues in the U.S. are more concerned than they were at the beginning of the year about what’s happening in the American economy. It’s not a comfortable position,” he said.
King was outvoted at this month’s policy decision in a push to expand the bank’s bond-purchase program by 50 billion pounds ($78 billion) to 375 billion pounds, while a majority on the panel preferred no change. In the last six weeks, investor concern grew that a Greek election result may lead to its expulsion from the euro, while Spain asked for a bailout.
“I’m very struck by how much has changed” since the bank published forecasts May 16, he said. “I am pessimistic, and I am particularly concerned because for two years now we’ve seen the situation in the euro area get worse, the problems have been pushed down the road.”
European leaders this week will hold their 19th summit to address the region’s sovereign debt crisis since it started in early 2010. Four officials led by European Union President Herman Van Rompuy today released a road map to fiscal and banking union that ran into immediate criticism from Germany for placing too little emphasis on controlling national budgets.
Global Economy
The turmoil in Europe has been compounded by signs of slowing growth in the U.S. and in Asia. Federal Reserve policy makers last week cut their growth forecasts for the world’s largest economy. A preliminary reading of China’s manufacturing data, published June 21, showed output may have shrunk for an eighth month in June.
King, who retires in a year, told the cross-party panel of lawmakers today that the world economy is not yet halfway through the global financial crisis that began in 2007.
“If you asked any of us in the bank, I don’t think any of us would have thought we would still be right in the thick of it five years later,” he said. “I don’t think we’re yet halfway through it. We’re in the middle of a deep crisis with enormous challenges to put our banking system right and challenges from other parts of the world.”
To contact the reporters on this story: Jennifer Ryan in London at jryan13@bloomberg.net; Scott Hamilton in London at shamilton8@bloomberg.net
To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net
