David Cameron has said that “red warning lights are flashing on the dashboard of the global economy” and a second global crash could be looming.
In a bleak assessment as the G20 summit draws to a close, the Prime Minister
said there were early signs similar to those seen before the global
recession six years ago.
There is a “dangerous backdrop of instability and uncertainty” with
diplomatic, humanitarian and economic problems across the world, he warned,
which potentially endanger Britain’s recovery.
Mark Carney, the Governor of the Bank of England, said hedge funds, private equity firms and other parts of the unregulated “shadow banking” world will face increased scrutiny over the possible risks that they pose to financial stability.
“When the crisis hit, all these shadow banking risks collapsed back on the
centre,” said Mr Carney, who is also chairman of the Financial Stability
Board.
The board, which is charged with introducing changes to reduce the risk of another crash, has reached agreement on banking reforms but Mr Carney said there was still substantial work ahead to implement them.
The Prime Minister said the slowdown in the eurozone is affecting British exports and manufacturing.
Mr Cameron said: “The eurozone is teetering on the brink of a possible third recession, with high unemployment, falling growth and the real risk of falling prices too.
“Emerging market economies, which were the driver of growth in the early stages of the recovery, are now slowing down. Despite the progress in Bali [trade talks in 2013], global trade talks have stalled while the epidemic of Ebola, conflict in the Middle East and Russia’s illegal actions in Ukraine are all adding a dangerous backdrop of instability and uncertainty.”
The British economy was the fastest-growing in the G7, with “record numbers of new businesses, the largest ever annual fall in unemployment, and employment up 1.75 million in four years”, Mr Cameron said.
“But the reality is, in our interconnected world, wider problems in the global economy pose a real risk to our recovery at home,” he added.
Mr Cameron said retreating from the world or imposing extra tax and borrowing would only repeat past mistakes. He claimed the G20 communique negotiated at the summit endorsed Britain’s determination to use monetary policy to support growth and would not waver on his policy of paying down government debt.
The former prime minister, Sir John Major, told The Andrew Marr Show on BBC One that people were “concerned and worried” that “none of the growth in the economy has yet reached wage packets or salary slips”.
Chris Leslie, the shadow chief secretary to the Treasury, said: “Working people are £1,600 a year worse off under [David Cameron’s] Government, borrowing is going up so far this year and exports have fallen behind our competitors.”
The board, which is charged with introducing changes to reduce the risk of another crash, has reached agreement on banking reforms but Mr Carney said there was still substantial work ahead to implement them.
The Prime Minister said the slowdown in the eurozone is affecting British exports and manufacturing.
Mr Cameron said: “The eurozone is teetering on the brink of a possible third recession, with high unemployment, falling growth and the real risk of falling prices too.
“Emerging market economies, which were the driver of growth in the early stages of the recovery, are now slowing down. Despite the progress in Bali [trade talks in 2013], global trade talks have stalled while the epidemic of Ebola, conflict in the Middle East and Russia’s illegal actions in Ukraine are all adding a dangerous backdrop of instability and uncertainty.”
The British economy was the fastest-growing in the G7, with “record numbers of new businesses, the largest ever annual fall in unemployment, and employment up 1.75 million in four years”, Mr Cameron said.
“But the reality is, in our interconnected world, wider problems in the global economy pose a real risk to our recovery at home,” he added.
Mr Cameron said retreating from the world or imposing extra tax and borrowing would only repeat past mistakes. He claimed the G20 communique negotiated at the summit endorsed Britain’s determination to use monetary policy to support growth and would not waver on his policy of paying down government debt.
The former prime minister, Sir John Major, told The Andrew Marr Show on BBC One that people were “concerned and worried” that “none of the growth in the economy has yet reached wage packets or salary slips”.
Chris Leslie, the shadow chief secretary to the Treasury, said: “Working people are £1,600 a year worse off under [David Cameron’s] Government, borrowing is going up so far this year and exports have fallen behind our competitors.”
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