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from Breakingviews:

Irish politics could complicate EU bailout

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

LONDON -- Ireland's politics could complicate its bailout with potentially devastating consequences. Even though the ruling coalition has applied for financial aid, political turmoil means it may not survive long enough to negotiate a deal with the European Union and International Monetary Fund. With years of painful austerity on the way, the desire for a political fresh start is understandable. But any delay could further undermine confidence in the country's fragile banks.

Ireland's government is on life support. The Green party -- the junior member in the ruling coalition -- has promised to withdraw its support from the Fianna Fail party once the bailout is finalised. Meanwhile, two independent parliamentarians on whom the government relies for backing have indicated that they may not even support the crucial budget on Dec. 7. The government's three-seat majority is likely to be reduced to two following a by-election later this week. So the administration may need the support of opposition parties to get the budget through.

Failure to pass this needed round of austerity measures would scupper the bailout -- and throw Ireland into deep financial turmoil. In an effort to defuse the political crisis, Prime Minister Brian Cowen on Nov. 22 promised to call an election once the bailout is agreed. But even this may not be enough. Opposition parties could insist on an immediate election in return for sanctioning more cuts. If that were to happen, a new government would probably not be in place before January.

BoE’s King “doesn’t do sex appeal”


Bank of England Governor Mervyn King was on good form when he addressed the Royal Society – Britain’s oldest scientific discussion club – on the vexing issue of communicating complex forecasts to the great unwashed.

Aside from his usual moan about the media’s desire to reduce the BoE’s beautiful but baffling ‘fan charts’ of inflation forecasts to one or two numbers, he made a rare and welcome admission that in past years the central bank had not done as well as it could have to flag up the risk that a financial crisis was about to happen.

from The Great Debate UK:

Bank hedges bets with QE expansion

BRITAIN-BANK/RATESWhen the Bank of England decided to expand its quantitative easing policy by 25 billion pounds to 200 billion on Thursday, it was essentially hedging its bets.

After Britain's economy shrank unexpectedly in the third quarter, and with two thirds of the City expecting an expansion to the QE programme, simply shutting off the tap of government bond purchases would risk being more of a shock than the economy could bear.