BRITISH REACTION:BRITISH CHANCELLOR of the exchequer Alistair Darling has been warned that he needs to "come to decisions rapidly" if he intends to recapitalise British banks.
The warning came from former Conservative chancellor Kenneth Clarke in exchanges in the House of Commons yesterday following a cautious statement in which Mr Darling announced that the Bank of England will today inject a further £40 billion (€52 billion) into the system to help ease the credit crunch.
Shadow chancellor George Osborne backed the latest cash injection by the Bank of England, while saying it was "unsustainable" for the bank to be "not just a lender of last resort but the lender of only resort". Urging a process of "recapitalisation" of British banks with strict conditions attached to protect taxpayers' money, Mr Osborne repeated his view that the Labour government's "ad hoc" or case-by-case approach to problems was "running out of road".
Liberal Democrat spokesman Vince Cable claimed prior authorship of this proposal for what he called "a partial nationalisation", while again calling for "radical cuts" in interest rates.
Mr Darling repeated that the government was "ready, with the resources and the commitment, to do whatever is necessary" to ensure financial stability. However, Mr Clarke cautioned that speculation about the possible recapitalisation of the banks could be harmful, and urged the chancellor to come to any decisions necessary "as quickly as possible".
Having told MPs that "all practical options" remained open to him, Mr Darling said events in the United States in recent weeks had shown there would be nothing worse than to bring forward a plan that wasn't properly developed. He agreed it was important to take decisions quickly "consistent with having proposals developed and ready to implement".
As prime minister Gordon Brown sought further clarification from German chancellor Angela Merkel on Germany's position regarding a guarantee of bank deposits, Mr Darling confirmed that the Financial Services Authority was considering a further increase in the protected limit for retail deposits. This will rise to £50,000 from today in order to "ensure that arrangements here continue to be comparable with international best practice".
As he prepared for talks with other EU finance ministers in Luxembourg, Mr Darling said events over the weekend had again demonstrated the desirability of EU member states working together in response to the crisis.
Mr Darling said "unilateral" actions taken by the Irish and German governments would have a knock-on effect on other member states. As far as he was aware no government or the European Commission had been given advance notice of the Irish Government action to guarantee deposits.
Amid continuing confusion, meanwhile, Mr Darling said he understood the German action on Sunday amounted to "a political declaration" rather than a legally binding one about bank guarantees.
Criticising unilateral actions by the Irish, German, Danish and Greek authorities, Mr Osborne had said it was "not helpful for European leaders to call for international co-operation at summits and then hours later act unilaterally".
Mr Darling, however, stressed the need for co-operation while accepting that "countries need to do what they think necessary to protect institutions for which they are responsible".