euro|topics - The Bank of England comes to the economy's rescue

21/11/2008

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Main focus of Tuesday, April 22, 2008

The Bank of England comes to the economy's rescue

The Bank of England announced on April 21st a plan to prevent the subprime crisis from spreading to the rest of the economy. The plan will allow Banks to trade mortgage debt for government bonds. What impact will this measure have on the British economy?

The Times - United Kingdom

"It should not have taken the British authorities quite so long to accept that the crisis in financial markets was threatening the wider economy. The US Federal Reserve and the European Central Bank were much quicker to take decisive action," writes the daily in an editorial. "The Bank of England's offer to swap secure government bonds for riskier mortgage debt yesterday was a sensible and imaginative response to the credit crunch. ... it is far better to expose the taxpayer to limited risk now than to risk systemic failure in a panic-stricken banking system, which could turn the current shortage of loans into a prolonged drought and land the taxpayer with a bigger long-term headache. ... The only way to restore confidence in the system is for the authorities to show that they are genuinely committed to shoring up financial markets." (22/04/2008)

La Tribune - France

"The moralising posture that the Bank of England has had during the first six months of the subprime crisis is disappearing quickly," writes editorialist Pascal Aubert. "At the worst times during the financial crisis, the British central bank distinguished itself from its American and European counterparts by refusing to inject liquidity when it was needed. On several occasions, its governor, Mervyn King, justified the lack of action by explaining that those who took imprudent risks must not have realised that they would have to pay for their greed. ... Virtue has had to bow before economic reality, which has become preoccupying across the Channel. ... But Mervyn King and the Bank of England have only lost their pride in this affair. Which is little when compared with the risks the British economy would have taken if the monetary authorities had refused to budge in the name of principle and their credibility." (22/04/2008)

El Mundo - Spain

The daily writes that "the British Labour government chose to intervene in a drastic manner to avoid a crisis. It remains to be seen if this measure will raise confidence in the financial markets and if it will lead the banks to lend more money to credit consumers. ... If the urgent character of the situation explains the adoption of such a decision, it is all the same ironic to state that it is up to the state, at the end of the day, to repair the errors of poor private management. It would be preferable in the future to put in place better control mechanisms and thus avoid having to spend so much public money to manage these sorts of problems." (22/04/2008)

» To the complete press review of Tuesday, April 22, 2008

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