Sir Mervyn King: Eurozone crisis "my biggest worry"

Image caption,
Sir Mervyn will complete 10 years at the helm of the Bank of England next year

The governor of the Bank of England, Sir Mervyn King, says the eurozone debt crisis has created "a great black cloud of uncertainty" hanging over global business.

He accused EU leaders of failing to tackle the fundamental causes of the crisis and adopting a policy of "kicking the can down the road".

The eurozone crisis was his "biggest worry", he said.

Sir Mervyn was speaking to BBC Radio 4's The World At One.

"There is a great black cloud of uncertainty hanging over businesses all around the world," he said.

"The result is, until they know how this situation is going to be resolved, they are holding back from investment and spending."

As EU leaders delayed, the problem was "getting bigger all the time", he warned.

The biggest challenge facing the eurozone was "how to restore competitiveness," he said.

Sir Mervyn is concerned about the knock-on effect the crisis is having on the struggling UK economy, which counts on Europe for about 50% of its trade.

He admitted that the Bank's policy of quantitative easing, which has pumped £325bn so far into the UK economy, had "not restored us to prosperity yet", but had at least prevented the UK from performing even worse.

Total separation

On banking reform, Sir Mervyn reiterated his desire to see the Vickers proposals passed into law "as soon as possible", whereby retail and investment banking activities will be ring-fenced.

Media caption,
Martha Kearney joined the governor of the Bank of England Sir Mervyn King, on a regional visit to Wolverhampton

But he hinted that he would have preferred a total separation between the two.

Next year, Sir Mervyn is due to stand down after 10 years as governor of the Bank of England.

His deputy, Paul Tucker, who described the Libor rate-fixing scandal as a "cesspit" before the Commons Treasury Select Committee today, is tipped to succeed him.

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