(Source: Anna Tomforde dpa, Hamburg, Germany (MCT) — The British government and the Bank of England Friday launched a new multi-billion-pound credit easing scheme aimed at boosting bank lending to counter the “paralyzing effect” of the eurozone crisis on the economy.
The measures, announced late Thursday, were welcomed by business groups and the markets. Bank shares soared by around 6 per cent on the London Stock Exchange Friday.
The new measures, with an estimated potential value of 100 billion pounds (155 billion dollars) showed that the government was not “powerless in the face of the eurozone debt storm,” Chancellor of the Exchequer George Osborne, said.
One part of the so-called funding-for-lending scheme, under which banks will be able to borrow at least 5 billion pounds a month from the Bank of England – on condition that they increase their lending – was implemented with immediate effect Friday.
Further proposals, to be phased in over the next few weeks, will enable banks to swap loans to businesses and individuals for government bonds.
The Treasury estimates that the programme could support 80 billion pounds in new loans at below-market rates.
The support will be conditional on the “performance of banks in sustaining or expanding their lending.”
The measures are seen as an additional plank to the Bank of England’s so-called quantitative easing scheme, under which 325 billion pounds have been pumped into the economy since 2009.
Critics were doubtful Friday that the latest package, announced just ahead of a crucial election in Greece, would have a significant impact.
Ed Balls, economic policy spokesman for the opposition Labour Party, said the new measures amounted to an admission by the government that its austerity policy had chocked off the economy, and that it needed to change course. dpa aet jln Author: Anna Tomforde
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