The pound was sluggish against the single currency yesterday, after official data in the UK revealed that state debt, including estimates for the liabilities of recently nationalised banks, has jumped to £2.2 trillion – equivalent to around 150% of GDP. It was also revealed that tax receipts were almost £7bn lower than the same month last year, confirming how much the economy has slowed in the past year.
Bank of England Deputy Governor John Gieve said yesterday that policy makers are fighting to protect Britain from the threat of a decade-long depression similar to that suffered by Japan in the 1990s. Gieve has also confirmed that quantitative easing is likely to start in the next few weeks. It should be noted that the euro is coming under increasing pressure as well, especially if, as expected, Jean Claude Trichet confirms today that interest rates are set to fall next month.
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