LONDON – Liz Truss reappeared today to reassure the markets, but “mission impossible” failed. The British prime minister, who has remained invisible in the last few days of the financial storm, has released a series of interviews, insisting that the government intends to continue with its strategy of more borrowing to cut taxes with the aim of reviving growth.
“Our plan is right,” Truss said, declaring that her government is ready to “make tough decisions” for the good of the country. The turmoil in the markets will pass, while the measures announced last Friday will raise productivity and increase GDP by 2.5% annually, eliminating the recession risks already reported by the Bank of England.
Markets on the attack
Markets have not reacted favorably to the prime minister’s insistence to stay the course, ignoring criticism from many economists, the International Monetary Fund and the opposition, but also a growing number of Conservative MPs. The pound lost 0.9% against the dollar, while yields on long-term government bonds began to rise again, indicating a lack of confidence in the government.
On Wednesday, the Bank of England was forced to step in with the purchase of 10- and 20-year bond notes, an unprecedented measure that would cost £65 billion, averting the imminent collapse of many British pension funds. The bank had warned of “material risks to the financial stability of the UK”.
Mark Carney, the former governor of the Bank of England until 2020, accused the government today of acting irresponsibly, effectively blaspheming against the Bank of England which had to take cover to plug a wound that has completely infected itself. Carney said Truss’ plan could lead to more growth, but it would take a long time and at the same time Britain’s reputation as a “fiscally responsible” country was badly damaged.
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