1:09pm Tuesday 26th June 2012
© Press Association 2014
Bank of England Governor Sir Mervyn King has said he is "pessimistic" over the chances for a eurozone recovery and warned Britain is still not halfway through the financial crisis.
In a gloomy Treasury Select Committee hearing, Sir Mervyn braced Britons for at least another five years of pain as he saw no sign yet of an end to the global financial woes.
The Bank chief told MPs he was "struck" by the speed at which the economic outlook was deteriorating as the eurozone crisis deepened, with conditions now worsening in previously booming areas such as Asia and other emerging markets.
He said he was "pessimistic and particularly concerned" as the problems in Europe continue without any decisive action.
Sir Mervyn added nobody expected the financial crisis that began in 2007 to have lasted so long, but said: "I don't think we're halfway through it".
He added: "My estimates of how long it will take to recover is expanding all the time."
There was little sign of further help for borrowers as Sir Mervyn argued that interest rate cuts would do little to help UK recovery efforts.
In response to recent calls from the International Monetary Fund to slash rates to lift Britain out of its double-dip recession, Sir Mervyn said an interest rate reduction would fail to lead to widespread cuts in borrowing costs and could instead damage small lenders.
He said if interest rates - which have been held at a record low of 0.5% - were reduced further, it would risk hurting building societies by squeezing their already tight interest margins.
He confirmed the Bank had "not ruled out" a reduction of rates below 0.5%, but added that in view of multibillion-pound measures being taken to boost bank lending, "a bank rate cut won't make a difference".
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