Download Bank of England governor Mervyn King faced a flurry of questions

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Bank of England governor Mervyn King faced a flurry of
questions from a parliamentary committee about the status
of the UK economy. The questioning comes at a time when
Britons are facing the biggest squeeze in their incomes in
three decades alongside harsh government spending cuts.
Deteriorating growth prospects prompted the BOE to
give the economy a 75 billion pound cash injection. King
said quantitative easing will make a difference to the level
of lending.
"I can't guarantee that it means that bank lending will rise,
but what I do believe is that it won't fall as far as it might
otherwise have done and it may start to rise now we'll see.
But I think the action will make a difference to the amount
of lending, but it certainly doesn't guarantee that lending to
the real economy is positive."
Britain's economy has been stagnant for the last year and
there are fears it could soon start shrinking again. Even
the BOE's chief economist acknowledged there are tough
times ahead.
''But I certainly accept that what is happening in the
economy now is a very large squeeze on household
income. Real take home pay has fallen by more in the past
two years than in any time in living memory. Now that's not
the result of inflation being high, inflation is the symptom.
The causes of that squeeze on living standards are real
causes. They are a change in real prices of energy, and
utility prices of gas, electricity at home. They are the
consequences of higher value added tax, higher food
prices and consequence of a fall in the real exchange rate
which was necessary to enable us to be able to rebalance
our economy in a way that was vital after quite a long
period and of relatively either exchange rate.''
King's quizzing comes a day before European leaders meet
in Brussels to hash out a plan to tackle the eurozone's
deepening debt crisis to which Britain is barely exposed.
"The aim of the measures to be introduced over the next
few days is to create a year or possibly two years' breathing
space. The underlying problems still have to be resolved."
Despite attempts from the Bank of England to shore up
Britain's economy, a recent report showed Brits are
resisting the urge to splurge and are holding on to their
cash in anticipation of the rocky road ahead. Basmah Fahim,
Splurge: spend (money) freely or extravagantly