BRITAIN’S economy is getting back on its feet and “a recovery is in sight”, Bank of England governor Sir Mervyn King said yesterday.
Fears of a triple dip recession have been eradicated, employment increased by tens of thousands in March and the UK is rebalancing towards sustainable export growth.
The spurt of growth stands in stark contrast to the gloom in Europe, where France has plunged back into recession and even Germany is barely keeping its head above water.
“There is a welcome change in the economic outlook – growth is likely to strengthen over the course of the year,” King predicted. “That is the first time I have been able to say that since before the financial crisis.”
He believes growth will pick up from 0.3 per cent in the first quarter to 0.5 per cent in the second quarter.
And chancellor George Osborne last night argued the positive forecasts mean critics like the International Monetary Fund are wrong to call on him to spend and borrow even more money.
“The most recent economic news has been more encouraging. The economy is growing. Surveys are better. Confidence is returning to financial markets,” he told the Confederation of British Industry last night.
“Our plan is working. Now is not the time to lose our nerve. Let’s not listen to those who would take us back to square one. Let’s carry on doing what is right for Britain.”
Osborne urged the Bank of England to continue pumping cheap money into the economy, in a sign that incoming governor Mark Carney will keep monetary policy very loose. And the chancellor also said he is pushing for more supply-side reforms – typically cutting red tape and taxes – in an effort to get businesses growing and exporting more.
The CBI backed the chancellor, arguing the deficit reduction plan is the only option.
“Whilst siren voices may suggest relaxation – in the words of Baroness Thatcher, ‘this is no time to wobble, George’,” said CBI president Sir Roger Carr.
THE EUROZONE is mired in its longest ever recession, with figures from Brussels revealing yesterday that the single currency area began 2013 by sinking to a sixth consecutive quarter of contraction.
GDP was down 0.2 per cent in the first quarter of the year compared to the end of 2012, and economists expect the ailing currency bloc to experience yet another drop in the second quarter.
The financial crisis prompted a more severe hit in 2008 and 2009, yet the slump was shorter-lived, lasting for five quarters.
Unemployment in the area has climbed to 12.1 per cent, statistics revealed last month.
Yesterday’s data also showed that the Eurozone’s second largest economy – France – has fallen into another official recession. French GDP sank 0.2 per cent in the three months to March, continuing a 0.2 per cent decline in the previous quarter.
“The core is now as rotten as the periphery,” commented Hector McNeil, chief exec of City firm Boost ETP. “The distinction between the two is now all but meaningless, as even German growth has slipped to negligible levels and France’s economy is wilting faster than President Francois Hollande’s re-election prospects.”
Germany, often seen as the powerhouse economy of the euro area, saw its economy grow by just 0.1 per cent in quarter one, the estimates showed – having shrunk by 0.7 per cent the previous quarter.
The bloc’s next two largest economies, Italy and Spain, were both down another 0.5 per cent. Economies also shrank in member states Finland, Cyprus, the Netherlands, Portugal, and Greece.
There was a glimmer of light for Greece yesterday, however, as an upgrade of its sovereign credit rating caused Greek 10-year government bond yields to plummet to their lowest level since June 2010.
Ratings giant Fitch lifted Greece to B-minus from CCC on Tuesday night.
The yields, which were over 30 per cent as recently as last summer, reacted by sinking as low as 8.16 per cent during yesterday’s trading, and were around 8.8 per cent last night.
Tim Wallace, Julian Harris