IMF: UK growth too low

The head of the International Monetary Fund has warned that growth in the British economy is too low and that the Chancellor should ease his austerity measures if the recovery fails to materialise.

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Clegg: Investment move 'not plan b'

Britain's Deputy Prime Minister, Nick Clegg, is seen appearing on the Andrew Marr Show
Britain's Deputy Prime Minister, Nick Clegg, is seen appearing on the Andrew Marr Show Credit: Reuters

The coalition is preparing a significant boost in state-backed infrastructure investment in a fresh push on growth, the Deputy Prime Minister has indicated.

Nick Clegg said instructions had been issued to the Treasury setting out the Government's plan to use its balance sheet to underwrite major projects such as housing.

It comes as the International Monetary Fund urged the UK to look at fuelling infrastructure funding or cutting VAT or National Insurance if the economic situation worsened.

In an interview with the Financial Times, Mr Clegg denied the shift in focus was "plan B."

He conceded the coalition's stark economic warnings could have a "dampening effect", telling the newspaper ministers had initially had no choice but to set out "in very lurid terms the state of the emergency we were facing."

"That kind of language over a prolonged period of time can have a dampening effect on mood, which is very important in an economy," he added.

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Low rate of inflation is 'welcome news' for the government

by - Economics Editor

The rate of inflation in the UK slowed from 3.5% to 3% in April which is a big drop, the lowest that it has been in two years. And it's welcome news for the government because it eases the squeeze on households. And it's also good news for the Bank of England.

It's main job is to keep a lid on inflation which has been stubbornly high. It's still a full percentage point above its target of 2%. But crucially, high inflation has been thought to be one of the reasons why the Bank of England has held back from QE, where it injects more money into the economy.

So as the IMF was recommending QE as a possible help for the economy, lower inflation makes that more possible. But 'one swallow does not a summer make' and we need to see a more consistent fall in inflation before they will act.

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Downing Street: 'IMF clearly endorses the Government's economic plans'

A Downing Street spokeswoman has said that the International Monetary Fund has "very clearly endorsed" the Government's economic plans as "appropriate."

The spokeswoman told reporters at a daily Westminster briefing that the IMF's comments about the possible need for fiscal easing related to "a hypothetical situation" was currently not an issue.

The Treasury has drawn up contingency plans in relation to possible outcomes of the eurozone crisis.

I am not in a position to talk about what the contingency plans are. The Treasury is working on contingency plans. That's the prudent thing to do.

– Downing Street spokeswoman

Greece seeks to reassure tourists visiting the country

The Greek national tourist board have issued a statement urging holidaymakers to continue to visit the country, despite the financial crisis.

The President of the Association of Greek Tourism Enterprises (SETE) told a conference on Saturday:

We are trying to change the way our country and its economy is run, however, this is not going to affect the quality of a holiday.

Greece remains one of the top destinations in the world and we reassure holidaymakers that this summer remains business as usual.

– Dr. Andreas Andreadis, President of SETE

Treasury Select Committee: 'Stakes are too high not to plan for Greek exit'

The Chairman of the Treasury Select Committee Andrew Tyrie has responded to the International Monetary Fund report published today, agreeing with the IMF that the Eurozone is now a "major threat to the UK's recovery". Mr Tyrie said:

The Governor of the Bank of England himself described the Eurozone as ‘a very significant catastrophe risk’ in evidence to the Treasury Committee.

That is why, although it is not an easy moment to contemplate a Greek exit, the contingency planning for it must be done. The stakes are too high not to do so.

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