Fallout: The Financial Crisis

U.K. recession is now official

Stephen Beard Jan 23, 2009
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Fallout: The Financial Crisis

U.K. recession is now official

Stephen Beard Jan 23, 2009
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TEXT OF INTERVIEW

Scott Jagow: The U.S. has been in recession for about a year, according to the people who track such things. But today, Britain, for the first time, proclaimed recession. We’re joined by our European correspondent, Stephen Beard, in London. Stephen, what’s it look like over there?

Stephen Beard: It indicates that the downturn is clearly accelerating, and accelerating fast. GDP in the last quarter fell 1.5 percent, much more than many people were forecasting and double the rate in the previous quarter. Unemployment has hit 1.29 million here — that’s well above 6 percent. And many forecasters are now saying on the basis of these figures that we now have this morning that unemployment will hit more than 3 million before this recession is out.

Jagow: Is there any sense that the British government and the new Obama Administration will work together in any way to tackle this dual recession?

Beard: British Prime Minister Gordon Brown would like nothing more than to be seen as almost an equal of Obama, as the wise old man of world economics counseling the newcomer. But he has huge problems here at home. This week, he launched a second major bank bailout, and it didn’t go down very well. Foreign exchange markets gave it the thumbs down, the pound fell to a 25-year low against the U.S. dollar.

Jagow: And what’s the main criticism there?

Beard: Well, it’s a worry, it’s a fear. Investors are fretting that the British government has taken on absolutely huge liabilities by offering to insure the toxic assets of British banks. I mean just to take one example, the Royal Bank of Scotland — the most vulnerable, the most troubled bank, which is now 70 percent owned by the British taxpayer — its liabilities are almost double the size of the entire British economy. Now, the British government says we can handle this, there is no problem, we are not Iceland, but there is clearly a lot of worry out there, a lot of unease.

Jagow: All right, Stephen Beard in London, thank you.

Beard: OK, Scott.

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