Things just keep getting worse for the embattled European economies. France is expected to enter recession before the end of the year and now the Bank of England has slashed the growth forecast for the United Kingdom.
The BoE has cut its growth forecast from the already dismal figure of 0.8% down to near zero. The move comes after a series of disappointing economic reports showed that the UK is sinking ever deeper into the quagmire of the double dip recession. Today’s quarterly inflation report indicated that the UK economy would not see any growth in 2012, a stark contrast to the 2% predicted at the same time last year.
BoE governor Sir Mervyn King told a news conference that any hope of a recovery had been dashed for 2012. He said; “The big picture is that output’s been flat for two years,” he told a news conference.
He also said that the future was unpredictable, since no-one could predict what would happen in the Eurozone crisis, which would have an impact on the UK.
“It’s a saga that goes on, and on, and on. The idea that we have come to the end of it is unrealistic. There’s still a long way to go,” he said.
The disappointing news has led to some economists calling for the bank to implement yet another round of quantitative easing, but seeing as how those measures have done very little to stem the tide in the past the bank will probably hold out on committing to further monetary easing measures. In July the bank pumped an extra £50billion into the economy taking the total amount of ash injected over £375billion.
The problems in Europe are the key reasons for the poor performance of the British economy, the uncertainty over whether Spain will ask for a full scale bailout, the problems in Greece, the sky high borrowing costs for Italy and the ever increasing public anger in Germany and elsewhere are all not helping matters. Any further problems out of the Eurozone would have far reaching and damaging impacts on the UK which is the Eurozone biggest trade partner.
The situation across the channel is just as gloomy after the Bank of France predicted that Europe’s second biggest economy is on the verge of sliding back into recession after predicting the country’s Gross domestic product will contract by 0.1% for the third quarter.
Perhaps it’s time the British government looked to the rest of the world to invest its economic future instead of pinning its hopes on a European recovery, after all there is still the commonwealth and all of those up and coming nations such as Brazil and China.
After-all it was Sir Winston Churchill that said; ‘We are with Europe, but not of it. We are linked but not compromised. We are interested and associated but not absorbed.’
The Pound to Euro exchange rate is currently trading at 1.266
The Pound to US Dollar exchange rate is currently trading at 1.564
The Pound to Australian Dollar exchange rate is currently trading at 1.481
The Euro to US Dollar exchange rate is currently trading at 1.235
The Euro to Pound exchange rate is currently trading at 0.789
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