George Osborne Warns Eurozone Recession Could Tip Britain Into Recession
A recession in the eurozone could tip Britain into recession as well, George Osborne has warned.
The Chancellor, in Brussels for talks with European counterparts, told BBC Breakfast: "If the eurozone goes into recession, into a deep recession, then I'm afraid Britain will find it difficult to avoid a recession itself, because people watching this programme will be going to work in companies that make things that they would normally sell to Germany, France, Italy and the like.
"That's where Britain makes a lot of its money, so we are very affected by what happens in the eurozone."
Britain can do two things to help - put its own house in order, and urge the countries of the eurozone to deal with their problems as well, he added.
He was speaking the day after warning that Britain faces another six years of austerity and admitting the country's finances are in an even worse state than feared.
Delivering a grim assessment in the Autumn Statement, Mr Osborne said the stalling economy meant the Government's efforts to tackle the deficit would have to continue far beyond the next general election.
Figures released by the independent Office for Budget Responsibility (OBR) show the Government is on track to borrow £111 billion more by 2016 than had been expected as recently as March. Unemployment is due to peak at 8.7% next year.
Mr Osborne responded by setting out a drastic package designed to boost growth, with the public sector bearing much of the pain in order to free up money for investment. Annual pay rises for state employees - many of whom are on strike over pension curbs - will be capped at 1% for two years following the conclusion of the current pay freeze in 2012, effectively mean a real-term cut for millions.
Mr Osborne raised billions of pounds more by accelerating the increase in the state pension age to 67 by eight years to 2026, and controversially announced that tax credits will be held down for many working people and parents. Pensioners will see a £5.30-a-week boost to £107.45 in their basic state pension and working-age benefits will be uprated in line with September's CPI inflation rate of 5.2%.
However he had some good news for motorists and rail users, cancelling a 3p fuel duty rise scheduled for January and reducing planned train fare increases to inflation plus 1%.