A report from leading economists warns Britain is at a ‘‘critical juncture’’ because of the threat of contagion from the Eurozone debt crisis and a deteriorating international economic outlook.
The economic forecasting group Ernst & Young Item Club warns the British economy will grow by 1.4 per cent rather than the 1.8 per cent predicted in April, and that consumer spending will fall by 0.4 per cent this year as well as saving falling as the result of intense pressure on family budgets because due to inflation.
President Barack Obama spent the weekend locked in crisis talks with congressional leaders in a bid to avoid defaulting on the country’s debts. The USA needs to raise the government £8.9billion borrowing £8.9billion limit, but right-wing Republicans are blocking the President’s plans to raise taxes on the rich as part of a package to deal with the problem.
There are growing fears that Italy could follow other Eurozone countries such as Ireland, Greece and Portugal and need a financial bailout.
Deputy Prime Minister Nick Clegg has said that a combination of political deadlock in the USA and mounting fears that more European countries face bankruptcy could plunge the global economy back into meltdown.