King's apocalyptic warning: politicians must find solution

GOVERNOR of the Bank of England Sir Mervyn King yesterday issued a stern warning that the eurozone crisis and resulting credit squeeze are "beyond the control" of any UK authority, and that bonuses and dividends must be restrained. Most worrying, he said politicians not bankers must provide the solution...

Apocalyptic warning
No one can accuse Sir Mervyn King of pulling his punches, says Alex Brummer in The Daily Mail. "The normally calm and phlegmatic career banker cut loose in his latest pronouncement on the global financial meltdown, declaring that the banking system was in a dangerous spiral 'characteristic of a systemic crisis'."

Brummer says that in his several decades as a financial and economics commentator, "I have never heard a sitting governor talk in such apocalyptic terms about the parlous state of the global financial system".

'Amazing' phrases
Simon Carr in The Independent says King's key phrases were "amazing". King spoke of a "spiralling and systemic crisis", an "exceptionally threatening environment" and a situation "beyond the control of the UK agency".
 
But the most ominous words weren't even "none of us really know what will happen", says Carr. They were: "Governments have to deal with the underlying causes". In that case then, "we really are doomed". 

Faint glimmer of hope
Jill Treanor in The Guardian called King's statements, "a stark acknowledgement that it was difficult to predict the outcome of the deepening sovereign debt crisis" in Europe. King called for banks to restrain bonuses and dividends to build up their financial strength, but "admitted that he did not know how much capital banks needed".  
 
Unfortunately, says an editorial in The Independent, as Sir Mervyn points out, central banks cannot solve the eurozone's problems. Only Europe's politicians can do that. "But there is a faint glimmer of hope. Finally, after months of cavilling and denial, European leaders are at least trying to forge the necessary political solution."
 
Don't count on politicians
Don't bet on the politicians succeeding, says Philip Stephens in The Financial Times. "European leaders have shown an unmatched talent for messing things up."
 
There has been a change in the political dynamics of the continent's sovereign debt crisis and this time policy-makers might just get it right, says Stephens. But then again, "no one has lost any money underestimating the quality of political leadership". ·