U.K. recovery will be long, arduous
TEXT OF INTERVIEW
Bill Radke: The head of Britain’s central bank this morning issued a grim forecast for his country’s economy this morning. Mervin King says the U.K. has just started on the road to recovery, and that road is going to be long and arduous. Marketplace’s Stephen Beard joins us live from London. Good morning.
Stephen Beard: Good morning, Bill.
Radke: Stephen, we know the British economy was still shrinking last quarter, unlike the U.S. But continental Europe has begun to improve. Are there no signs of life in the U.K.?
Beard: Some, yes. Mervyn King says there are tentative signs of recovery, but he’s still worried about the short-term risks facing the U.K. And he said he’s keeping an open mind about whether he’s going to continue printing more money and pumping more money into the system to stop it sliding back into a slump. In other words, keeping the financial system on life support. Many analysts had assumed that process was practically over here. Today, Dr. King said maybe not.
Radke: So his willingness to possibly pump more money into the economy, does that evoke scary government deficits there?
Beard: It is a major worry. The British deficit is among the highest in the world. The Fitch Rating Agency said yesterday that the U.K. is issuing so much government debt the country’s Triple-A credit rating could be in jeopardy. It could be the first major economy to lose that stamp of approval. That would be bad news for Britain. Government borrowing would be a lot more expensive.
Radke: We talk a lot here, about the dollar being anemic. How is the British pound holding up?
Beard: Pretty pasty, too. The pound fell this morning against a weak dollar. But Mervyn King is not concerned about that. He says a weak pound means cheaper exports. That could give a boost to the British economy.
Radke: Marketplace’s Stephen Beard, live from London. Thank you.
Beard: OK Bill.
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