King warns 'severe strains' in financial markets threaten UK

Mervyn King has warned Chancellor George Osborne the UK recovery is facing a growing threat from the euro crisis and deteriorating conditions in financial markets.

In his letter to Osborne accompanying today's shock move by the Monetary Policy Committee (MPC) to increase quantitative easing by £75bn, the governor of the Bank of England said the UK economy is under renewed pressure, with a greater than expected move needed to stimulate growth. "The pace of global expansion has slackened, especially in the United Kingdom's main export markets. Vulnerabilities associated with the indebtedness of some euro-area sovereigns and banks have resulted in severe strains in bank funding markets and financial markets more generally," he said in the letter. "...