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Is the UK on the Brink of a Sterling Crisis?

By +Eric Jafari

Is The Uk On The BrinkThe UK may have a rocky road ahead if the predictions of the Euro Group's new president come to fruition. Jeroen Dijsselbloem claims concerns over the state of Britain's finances are increasing, with high national debt and budget deficit leaving the country open to attacks from currency traders, the Daily Telegraph reported.

These statements come after news that the value of the pound slipped once again and will not be welcomed by the British government, which is set to deliver its Budget on March 20th. Sterling has gone into free-fall, dropping from €1.23 to below €1.16 since January. Confidence is arguably slipping and with the last sterling crisis of 1992 never far from people's mind, the coalition will be desperate to save the pound.

However, Mr Dijsselbloem's statements certainly cast doubt on the future. Speaking to students at the University of Amsterdam, he stated: "England is vulnerable; it may be faster on the currency speculation. That has happened in the past. A new sterling crisis could happen again." With relations between the EU and the UK already sensitive, Mr Dijsselbloem's conjecture about the state of the pound could also cause difficulties, the newspaper revealed.

Nonetheless, the UK is likely to put up a fight, with the Monetary Policy Committee (MPC) already voting for more stimulus to be introduced to boost the UK economy. During the meeting, Bank of England governor Sir Mervyn King was also among those recommending further quantitative easing. According to the minutes, Sir Mervyn, David Miles and Paul Fisher sought an additional £25 billion in quantitative easing, but were outvoted six to three. MPC members believe that more targeted measures are needed to address the UK economic position, boost the flow of credit and increase demand and supply in the economy.

David Cameron has, however, stated he will not go back on his plans for the economy. In a speech he claimed his policies were beginning to pay dividends and faltering at this juncture would "plunge us back into the abyss". "The decisions we make now will set the course of our economic future for years to come," he said. "We will stick to the course."

11 March 2013

Tags

Quantitative Easing,Jeroen Dijsselbloem,UK Economy