Mervyn King: UK outlook has worsened due to eurozone debt crisis
The news came as the country's public sector net borrowing rose much more than expected in May on a 7.3pc fall in income tax receipts.
"In the last six weeks... I am very struck by how much has changed since we produced our May Inflation Report," Mr King told parliament's Treasury Committee.
"I am pessimistic [about the eurozone outlook]. I am particularly concerned because over two years now we have seen the situation in the euro area get worse and the problem being pushed down the road," he said.
His views came as public sector net borrowing increased by £17.9bn in May compared with a rise of £15.2bn in the same month one year earlier, the Office for National Statistics said in a statement. Analysts had forecast a borrowing rise of £15.7bn.
"The main problem remains a sharp slowdown in tax receipts," said Vicky Redwood, chief UK economist at Capital Economics research group. "The combination of worsening public finances and renewed recession is likely to intensify calls for the government to change tack on its austerity programme."
Howard Archer, chief UK and European economist at IHS Global Insight, added: "The May public finances make pretty bleak reading for the Chancellor. Only two months into the fiscal year, it is evident that Mr Osborne is facing a major battle to meet his fiscal targets for 2012/13 and is in grave danger of losing it.
"While expenditure can fluctuate appreciably from month to month, it does suggest that the government is having trouble imposing its spending cuts. And if the spending cuts are yet to bite, the impact of this on the economy is yet to be felt, which is worrying for growth prospects."
Britain's economy slipped into its second recession since the start of the financial crisis around the turn of the year and fears of a longer slump have been rising as companies hold back investment and exports suffer from the eurozone crisis.
The central bank's Monetary Policy Committee voted 5-4 against buying more government bonds with newly created money to boost the economy, but most economists expect another round of quantitative easing in July. (AtW's comment: see now that Govt needs to borrow more they will print money, otherwise yields on bonds will be 6-7%)
The government and the central bank announced two schemes on June 14 get credit flowing through the economy by lowering banks' funding costs.
Policymakers Ben Broadbent and Spencer Dale - who both voted against more stimulus in June - as well as David Miles all indentified the eurozone debt crisis as the main threat to Britain's economy in their annual reports to parliament.
Source: Mervyn King: UK outlook has worsened due to eurozone debt crisis - Telegraph
DOOOOOOOOOOOOOOMED!
The news came as the country's public sector net borrowing rose much more than expected in May on a 7.3pc fall in income tax receipts.
"In the last six weeks... I am very struck by how much has changed since we produced our May Inflation Report," Mr King told parliament's Treasury Committee.
"I am pessimistic [about the eurozone outlook]. I am particularly concerned because over two years now we have seen the situation in the euro area get worse and the problem being pushed down the road," he said.
His views came as public sector net borrowing increased by £17.9bn in May compared with a rise of £15.2bn in the same month one year earlier, the Office for National Statistics said in a statement. Analysts had forecast a borrowing rise of £15.7bn.
"The main problem remains a sharp slowdown in tax receipts," said Vicky Redwood, chief UK economist at Capital Economics research group. "The combination of worsening public finances and renewed recession is likely to intensify calls for the government to change tack on its austerity programme."
Howard Archer, chief UK and European economist at IHS Global Insight, added: "The May public finances make pretty bleak reading for the Chancellor. Only two months into the fiscal year, it is evident that Mr Osborne is facing a major battle to meet his fiscal targets for 2012/13 and is in grave danger of losing it.
"While expenditure can fluctuate appreciably from month to month, it does suggest that the government is having trouble imposing its spending cuts. And if the spending cuts are yet to bite, the impact of this on the economy is yet to be felt, which is worrying for growth prospects."
Britain's economy slipped into its second recession since the start of the financial crisis around the turn of the year and fears of a longer slump have been rising as companies hold back investment and exports suffer from the eurozone crisis.
The central bank's Monetary Policy Committee voted 5-4 against buying more government bonds with newly created money to boost the economy, but most economists expect another round of quantitative easing in July. (AtW's comment: see now that Govt needs to borrow more they will print money, otherwise yields on bonds will be 6-7%)
The government and the central bank announced two schemes on June 14 get credit flowing through the economy by lowering banks' funding costs.
Policymakers Ben Broadbent and Spencer Dale - who both voted against more stimulus in June - as well as David Miles all indentified the eurozone debt crisis as the main threat to Britain's economy in their annual reports to parliament.
Source: Mervyn King: UK outlook has worsened due to eurozone debt crisis - Telegraph
DOOOOOOOOOOOOOOMED!
Comment