British markets steady as Cameron takes charge
Britain's new Prime Minister David Cameron and his coalition government took charge Wednesday, boosted by a steadier London stock market and pound although data showed unemployment at a 16-year high.
"No modern government has inherited such a difficult economic situation from its predecessor," new finance minister George Osborne said as he immediately set about bringing down a record British public deficit.
"The rise in unemployment this morning is a confirmation of that and we know that we have the largest budget deficit in Europe (...) There is going to be a significant acceleration in the reduction of the structural budget deficit."
Osborne, a member of the main coalition partner the Conservatives, is to deliver an emergency budget within 50 days.
London's FTSE 100 index of leading shares was flat at 5,327.55 points in midday trade, pulling back from recent sharp losses as Conservative leader Cameron began his job as prime minister.
On Tuesday, his party, which won the most votes and seats in last week's general election but not a majority in parliament, struck a coalition deal with the third-placed Liberal Democrats that ended 13 years of Labour rule.
"Markets had feared a negative start (on Wednesday) but as the dawn of a new political era takes place, there appears to be a collective sigh of relief that we have a clearer way forward," said ODL Securities trader Owen Ireland.
In foreign exchange trade, the pound gave up early gains to stand at 1.4912 dollars, down from 1.4956 in New York late Tuesday. It fell to 1.1781 euros from 1.1812 on Tuesday as traders banked quick profits.
Bank of England governor Mervyn King meanwhile welcomed plans by the new coalition government to begin cutting the nation's record deficit this year, calling the move "sensible."
Cameron's plan to make six billion pounds (seven billion euros, nine billion dollars) of public sector savings in 2010 was deeply opposed by his Labour predecessor Gordon Brown.
Brown argued that such a move would derail Britain's fragile economic recovery. Cameron, however, insists immediate savings are necessary to avoid risking a return to recession.
Asked about the centre-right coalition's deficit reduction plan, King told reporters: "It is sensible."
"We have a very large fiscal deficit and we have to demonstrate we are capable and I'm convinced we are and will be (capable) of dealing with this problem."
Britain borrowed a record 152.8 billion pounds in the 12 months to March.
That was 65.9 billion pounds higher than in the 12 months to March 2009 as a record recession slammed tax revenues and the government was forced to prop up failing banks.
Britain's economy grew by a weaker than expected 0.2 percent in the first quarter of 2010.
However, this is expected to be revised upward to 0.3 percent following strong manufacturing data for March.
Britain emerged from a record-length recession in the final three months of 2009 with growth of 0.4 percent after six straight quarters of falling output.
In a stark reminder of what lies ahead for Britain, data published on Wednesday showed the nation's jobless total increased by 53,000 in the three months to March.
At 2.51 million, the total jobless figure stands at the highest level since 1994. The unemployment rate managed to hold steady at 8.0 percent in March.
Analysts warned of further job losses ahead.
"Significant job cuts in the public sector are looming as part of the major squeeze that has to occur on government expenditure," IHS Global Insight economist Howard Archer said.
© 2010 AFP