The UK unveiled an extraordinary series of measures designed to insulate the British financial system and economy from the eurozone's deepening crisis.
Chancellor of the Exchequer, George Osborne, and Bank of England Govenor, Mervyn King, announced plans to flood banks with cheap funds in an attempt to jump-start lending to British households and businesses, and to fend off potential financial problems at big UK lenders. The British programmes resemble some of the emergency measures enacted by central banks in Europe and the US earlier in the financial crisis. The British announcement on Thursday, at an annual black-tie dinner with bankers in central London, reflects leaders' intensifying concerns that Europe's crisis threatens to drag down the UK economy and financial system. "These are very difficult economic times—as difficult perhaps as any our country or our continent has faced outside of war", Mr Osborne said. "Together we can deploy new firepower to defend our economy from the crisis on our doorstep."
In the US, Fed officials say they are prepared to reactivate several programmes to provide short-term funding to markets if conditions deteriorate. Those programmes, originally created during the 2008-09 financial crisis, offered cheap loans to banks and flooded the US financial system with liquidity to prevent strains. The US central bank is also providing dollar funding to Europe through the European Central Bank to ensure that the continent's financial institutions have access to the US currency, which they use to make loans around the world. Fed Chairman Ben Bernanke last week said those currency swap lines were "very helpful in reducing stress in dollar-funding markets".
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