Paying for persistence

Easing into the next generation of operations amidst caution and surrender

The Bank of England will produce £25bn over the next three months to bolster and catalyse recovery. Quantitative easing will be increased to £200bn in a bid to stop inflation falling below its two percent target. "On balance, the committee believes that the prospect is for slow recovery in the level of economic activity, so that a substantial margin of under-utilised resources persists," the bank said. As the recession continued into its sixth quarter, the bank added that output had dropped by six percent since the start of the crisis. It comes from reduced spending and business investment, as caution continues to hold its place as the attitude of the day.

But will this be the last extension to the quantitative easing programme? Hopefully, unless the eventual recovery suffers a relapse next year. With the return of VAT to 17.5 percent in 2010, inflation will hopefully be pushed up sharply. But that's just a short-term fix, and the British Chambers of Commerce (BCC) were only too quick to notice this: "We are pleased with the decision to increase the QE programme to £200bn, but disappointed that the MPC has not taken more specific measures aimed at stimulating bank lending to companies."

Over on the continent, General Motors' sudden refusal to sell its European operations has caused angry protests. German Chancellor Angela Merkel had presumed a proposed €4.5bn deal would save 25,000 jobs but GM this week surprised everyone by announcing a restructure, making way for some 50,000 new jobs. In spite of this, the trust issue remains: German Opel jobs could be affected, and the workers have no idea what's going to happen next.