Bank of England hints at economic 'green shoots'

The governor of the Bank of England said he believed there were signs of an economic recovery in the UK, although he warned much would depend on the state of the eurozone.

In an interview with Channel 4 News last night Sir Mervyn King said the UK's prospects would be influenced by the crisis surrounding the euro, which was hanging over the domestic economy like a “black cloud”.

However he believed the next quarter would show signs of a pick-up in economic activity, although recovery would be “slow”.

In the interview King also said it would be OK for the government to miss its target to reduce the budget deficit by 2015 so long as it was a consequence of a wider, global economic slowdown.

This prompted some observers to suggest a 'green light' had been given to Chancellor George Osborne to miss the government's goal.

King meanwhile warned that taxpayers may have to step in to bale out UK banks again, although he said he believed it would be for a shorter period than last time.

“We have to make our banking system safer. We can do it and we must. What we have to do is straightforward, we have to change way banks finance themselves.

“They don't get money from shareholders in the same way as businesses do, they fund themselves by borrowings. It is important we impose limits on how much banks can fund themselves through such borrowings."

Asked whether he found the job as head of the UK’s central bank stressful, King replied: “Supporting Aston Villa is much more stressful than being governor of the Bank of England.”

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