UK economy, Euro, plunge.

[Funky Cold Medinar]

http://news.yahoo.com/s/ap/20110125/ap_on_bi_ge/eu_britain_economy

Not sure if this belongs in this section, but I can't help but feel it is ALL tied together. Countless blessings and endless peace to ALL....GO RV!

[rjboots1]

Britain is plagued, like almost every country in the Euro zone along with the US, with unsustainable levels of soveriegn debt. In my opinion, neither England nor the US have ever really come out of the recession at all, but the brainiacs say differently based on GDP numbers. They're in trouble. We're in trouble. Most of Europe is in trouble. And the only wild card that any of us have going for us is the IQD revaluation. It probably won't change anything in the grand scheme of global economics, but it should postpone the next leg down, and could possibly lessen the looming disaster somewhat. Until politicians quit buying re-election votes with tax dollars, we really don't have a chance. At home we know, if you spend more than you make, then your upkeep will be your downfall. Congress and the white house haven't figured that out yet. It's apparently not complicated enough for them to understand.

[aferriss]

Wow. I guess everyone is in the same boat pretty much. Recession in the U.S. and now the U.K. Bankers and national leaders cutting spending and/or freezing spending. Looks like hard times for everyone. I hope they rv soon for our sakes and theirs, but only God and time can tell. I'll be in my prayer closet.

[sunshinelvr]

UK economy shrinks and pound plunges

Buzz up!0 votes ShareretweetEmailPrint AP – People walk past a closed shop in west London, Tuesday Jan. 25, 2011. Official statisticians from the …

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By PAN PYLAS, Associated Press Pan Pylas, Associated Press – 1 hr 26 mins ago

LONDON – An unexpected downturn in the British economy shocked investors on Tuesday, prompting a sharp drop in the pound and reigniting debate about the government's plans to slash spending and raise taxes to reduce public debt.

The figures showing a 0.5 percent GDP drop in the last three months of 2010 fueled speculation that the British economy was heading back into recession — defined as two quarters of negative growth — and reined in expectations that the Bank of England would start raising interest rates soon in response to stubbornly high inflation levels.

The figures are preliminary, leaving them open to revision, and followed four quarters of growth — including 0.7 percent in the third quarter — as Britain climbed out of a deep recession.

In the text of a speech in Newcastle, Bank of England governor Mervyn King appeared to indicate that he wasn't in a rush to start raising borrowing costs, a move that could dampen growth. He argued that the drop in living standards for millions of Britons was an "inevitable price" to pay for the financial crisis and subsequent rebalancing of the world and U.K. economies.

"At some point Bank Rate will have to return to a more normal level ... but a return to economic stability from our fragile conditions will require careful and well-judged steps looking beyond the next few months," King said.

King conceded that inflation would likely rise to between 4 and 5 percent in the coming months from the 3.7 percent in December as the recent spike in energy and commodity costs combine with higher sales taxes. But he said price pressures would start to fall next year as the economic downturn continues to rein in wage increases.

In any case, King insisted there's very little monetary policy can do to keep a lid on the prices of imports, such as food and oil.

"Monetary policy cannot be based on wishful thinking," King said. "So unpleasant though it is, the Monetary Policy Committee neither can, nor should try to, prevent the squeeze in living standards, half of which is coming in the form of higher prices and half in earnings rising at a rate lower than normal."

King noted that real wages — the difference between pay rises and inflation — would likely fall again this year to levels no higher than in 2005.

"One has to go back to the 1920s to find a time when real wages fell over a period of six years," King said.

The governor's comments come in the wake of figures from the Office for National Statistics showing that Britain's economy shrank again in the fourth quarter of 2010, largely because of the heavy snow that gripped the country during December, snarling roads, crippling Heathrow and other airports and keeping people away from shops before Christmas.

But statisticians said the economy would have flatlined even without the snow, stunning markets that had been expecting a 0.5 percent increase in GDP.

Within a minute or two of the data's release, the pound had dropped over a cent against the U.S. dollar, falling to a low of $1.5753 before settling around the $1.58 mark before King took to the stage. Stocks suffered too, with the FTSE 100 index of leading British shares underperforming its peers, closing down 0.4 percent at 5,917.71.

Analysts said the grim economic figures will make it difficult for the Bank of England to hike any time soon especially as the Conservative-led coalition government is at the beginning of a sharp fiscal retrenchment. The raft of spending cuts and tax increases the government announced last autumn have not yet even come into force during the fourth quarter.

"Questions will be raised about whether this reflects the onset of the double-dip that had been feared, and no doubt the impact of the coalition's fiscal plans will be under even more intense scrutiny in an environment where the recovery looks to be faltering," said George Buckley, chief U.K. economist at Deutsche Bank.

Britain plans sharper spending cuts than any of the other major global economies and how it fares is being closely monitored around the world, particularly in Europe.

George Osborne, Britain's finance minister, conceded that the figures were disappointing but said the government would not be "blown off course" by the bad weather as it tries to get a grip on the public finances. Separate figures indicated that borrowing in December was much lower than anticipated, which could mean the deficit in 2010-11 will come in below forecast.

"We have had the coldest weather since records began in 1910 and this has clearly had a much bigger impact on the economy than anyone expected," Osborne said.

Ed Balls, the new economic spokesman of the opposition Labour Party, urged a rethink in government policy,

"The fact is cuts which go too far and too fast will damage our economy," Ball said. "And shrinking growth and rising unemployment is not only bad news for families but will actually make it more difficult to get the deficit down."