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‘No obvious end in sight’ for euro crisis

Bank of England Governor Mervyn King said the UK must press on with reforms to the banking industry and repeated his gloomy outlook for the euro-area debt crisis, which is impeding Britain’s economy.

“If the rest of the world were growing normally, the rebalancing and recovery of our economy would be much easier,” King wrote in an article in the Mail on Sunday newspaper, published yesterday. “But it isn’t. Even the rapidly expanding emerging-market economies are slowing, and the problems of the euro area continue with no obvious end in sight.”

King’s comments come days after the Bank of England cut its UK growth forecasts and said the outlook is “unusually uncertain.” The central bank is in the middle of a £50 billion ($78 billion) four-month programme of bond purchases and has left the door open to more stimulus for the economy if needed.

King, a sports fan who attends the Wimbledon tennis tournament every year, pointed to the success of London’s Olympic Games and said achievements such as winning a gold medal take “years of hard work.”

He said the UK’s long-term economic performance will depend on measures such as “reforming our banking system so that banks focus less on making money in the short term, and more on building businesses to serve their customers.”

“The government’s plans to build a wall between banks’ risky trading on one side, and their lending to businesses and families on the other, will help,” King said.

“As will the injection of new competition into our banking system. And, as recent scandals have shown, banks could learn a thing or two about fair play from the Olympic movement.”

The Sunday Times yesterday reported that UK Chancellor of the Exchequer George Osborne will advertise for a new Bank of England governor after several candidates dropped out of the race because of the Libor-rigging scandal.