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Britain is a' crisis economy 'says Mark Carney, incoming BOE Governor

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Britain is a' crisis economy 'says Mark Carney, incoming BOE Governor

Post  Panda on Fri 19 Apr - 17:30

Britain is a 'crisis economy', says Mark Carney

Mark Carney, the incoming Bank of England Governor, has described the UK as
a “crisis economy” as he sought to play down hopes that he could ride to the
country’s rescue.

Mr Carney said: “The US is
breaking out of the pack of crisis economies that include the eurozone, the UK
and Japan.” Photo:

By Philip Aldrick, Economics

6:25PM BST 18 Apr 2013


Speaking on the fringes of the International Monetary Fund’s spring meetings
in Washington, he said: “The US is breaking out of the pack of crisis economies
that include the eurozone, the UK and Japan.”

His words came just days after the IMF slashed its forecasts for UK growth
this year and next, and urged the Chancellor to scale back his £130bn austerity
programme to aid the recovery.

Christine Lagarde, the IMF managing director, signalled that the Fund will
demand the UK ease off at its annual Article IV update on the economy next

Asked whether she agreed with IMF chief economist Olivier Blanchard that the
Chancellor was “playing with fire” with his economic plans, she said: “We have
said that should growth abate then there should be consideration to adjusting by
slowing the pace.

“The growth numbers are certainly not particularly good. So, in a sense, this
is a continuation of the position. What has changed is clearly the quality of
the numbers.”

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Ms Lagarde’s comments dealt a damaging blow to the Chancellor, whose policies
she has previously championed. Her support has been critical to shoring up
George Osborne’s credibility in the face of Labour’s attacks.

Asked specifically about his opinion on the UK reovery, Mr Carney said he
would reserve his opinion until he starts at the Bank in July. However, he added
that “the flip side [of the UK’s problems] is the tremendous opportunity that is

In comments that will further disappoint Mr Osborne, Mr Carney stressed that
governments should not be looking to central banks to return countries to

“Can central banks provide sustainable growth? No. They can help with the
transition, but they can’t deliver long term growth. That needs to come through
true fiscal adjustments and necessary structural reforms… Sustainable growth
comes from the private sector.”

Mr Osborne is counting on Mr Carney being more radical than Sir Mervyn King,
who has refused to consider aggressive measures such as giving the market firm
guidance on future policy movements and using quantitative easing to buy assets
other than gilts.

The contrasting positions of Mr Carney and Sir Mervyn, whose second five year
term ends in June, were exposed by one exchange over the US Federal Reserve’s
decision to set an unemployment target alongside inflation. Mr Carney defended
the US stance and rejected Sir Mervyn’s argument that it could hold policymakers
hostage to unachievable goals.

A separate Treasury Select Committee report on Mr Carney’s appointment said
his commitment to end Sir Mervyn’s allegedly autocratic management style was

Andrew Tyrie, TSC chairman, said: “In evidence to the Committee, Mr Carney
set out his preference for a consensus-based approach to leadership; this will
be significant if it leads to a meaningful change of culture within the Bank.”

At the Reuters Newsmaker event in Washington, Mr Carney stressed that
his influence over policy at the Bank could be overstated. “It’s an honour and
responsibility [to be Governor] but it’s a responsibility that can be overplayed
as these powers are vested in committees. I’m a member of these committees.
Policy is not mine.”

Mr Carney also launched a withering attack on tax avoiders, acknowledging the
public outcry against multinationals in the UK. He said tax policy needed global
co-ordination, but added: “On a personal or corporate level, if there is a
persistent ability to avoid tax that means the burden of fiscal adjustment falls
on those who are paying their fair share – and they have to pay more than their
fair share.”











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