Chancellor George Osborne has warned that the economic recovery will be longer and harder than previously thought.
He told MPs in the House of Commons last week that recoveries from debt-driven recessions are always difficult, adding that people need to be realistic in their expectations for the future.
He said: “The world has now realised the huge overhang of debt means the recovery will take longer and be harder than had been hoped. Markets are waking up to that fact. That is what makes this the most dangerous time for the global economy since 2008.”
His comments came in a tumultuous week for global markets and European governments with Italy, France and Spain all taking emergency measures to address budget deficits. Osborne claimed that was “vindication” for his deficit reduction programme.
He blamed global instability for the recent string of downgrades to UK growth projections.
But Shadow Chancellor Ed Balls accused Osborne of being either “deeply complacent or in complete denial”, saying Government cuts have slowed growth further.
In a week when share prices in European banks tumbled, Osborne said UK banks are adequately capitalised and hold enough liquidity to cope with the current turbulence, adding “well rehearsed contingency plans” have been put in place if UK banks do come under threat.