The UK economy is facing an increased risk from the ongoing problems in the eurozone, Sir Mervyn King warned today.
The outgoing governor of the Bank of England claimed that the situation in Europe has become worse over the past year, noting that there has been a continued build-up in debt as southern European governments struggle to get their budgets under control, the BBC reported.
Sir Mervyn underlined the scale of the task facing his successor when he told the Treasury Committee that the economy is likely to see a slow and protracted recovery and there are difficult policy decisions ahead on when to start tightening monetary policy, and how rapidly.
There is also a great deal of adjustment that needs to be made in the financial sector and in the economy as a whole, he said.
On Monday Chancellor George Osborne announced the appointment of Mark Carney, currently governor of the Canadian central bank, as the next man to lead the Bank of England.
Carney was a surprise choice but his appointment was welcomed by the financial markets. He will assume the role in July 2013 and will hold expanded regulatory powers over banking and the financial system in the UK.
Sir Mervyn also welcomed his successor, saying that Carney represents a new generation of leadership for the Bank of England and is “an outstanding choice”.
The UK emerged from nine months in recession in the third quarter and the Office for National Statistics today confirmed its initial estimate that the economy grew by 1% between July and September, with consumer spending rising by 0.6%. The services sector grew by 1.3%, unchanged from the previous estimate, but growth in industrial production was revised down to 0.9% from 1.1%. Output of the construction industry is now thought to have fallen by 2.6%, compared with the previously estimated 2.5% decline.