Britain's Osborne defends austerity policies amid debt storm

11th August 2011, Comments 0 comments

British finance minister George Osborne on Thursday defended his government's austerity policies, but admitted that recovery would be longer than hoped amid global financial market turmoil over debt.

Osborne, addressing lawmakers after parliament was recalled early to debate the recent rioting, said that the deficit-slashing measures had made Britain a "safe haven" for investors -- but it was not immune to the international "storm".

The Conservative-Liberal Democrat coalition government, which took office last year, has sought to axe public spending and hike taxes in order to slash a record deficit and preserve the nation's top-level AAA credit rating.

"I believe that events around the world completely vindicate the decisions of this coalition government from the day it took office to get ahead of the curve and deal with this countrys record deficit," Osborne said Thursday.

"While other countries wrestled with paralysed political systems, our coalition government united behind the swift and decisive action."

He added: "These bold steps have made Britain that safe haven in the sovereign debt storm."

Financial markets have suffered dizzying losses in recent days and weeks amid mounting concern that the eurozone debt crisis and weak US economy could help push the world back into recession.

The British government had said last weekend that its austerity measures had been "vindicated" by Standard & Poor's move to slash Washington's top AAA credit rating.

"It is not hard to identify the recent events that have triggered the latest market falls," Osborne added on Thursday.

"There has been the weak economic data from the US and the historic downgrade of that country's credit rating.

"And the crisis of confidence in the ability of Eurozone countries to pay their debts has spread from the periphery to major economies like Italy and Spain.

"But these events did not come out of the blue. They all have the same root cause. Debt."

He added: "The whole world now realises that the huge overhang of debt means that the recovery will take longer and be harder than had been hoped.

"Markets are waking up to this fact and that is what makes this the most dangerous time for the global economy since 2008.

"I think we should be realistic about that. I think we should set our expectations accordingly."

And he also pledged that the government would continue to slash debt and fix the public purse, which was battered by recession-hit taxation revenues and a series of expensive bank bailouts in a sharp downturn that ended in late 2009.

"We must continue to put our own house in order," Chancellor of the Exchequer Osborne told parliament, and warned that economic recovery "will take longer and be harder than had been hoped".

Separately on Thursday, French President Nicolas Sarkozy called a meeting with German Chancellor Angela Merkel amid market turmoil to find solutions to the eurozone debt crisis. Merkel will travel next Tuesday to Paris.

© 2011 AFP

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