LONDON (Reuters) - Britain’s government and the Bank of England will act together with new monetary policy tools to tackle tightening credit and financial market conditions triggered by the euro zone crisis, finance minister George Osborne said on Thursday.
Osborne said BoE Governor Mervyn King would reveal more details of the scheme, designed to protect Britain’s ailing economy from the shockwaves of Europe’s banking and sovereign debt problems, in a speech at 1600 EDT.
“The immediate priority is to counter the tightening of financial conditions and increase in bank funding costs caused by the crisis in the euro zone,” Osborne told London’s financial elite in a speech.
“I can tell you today that the governor and I will take coordinated action on liquidity and on funding for new bank lending in order to inject new confidence into our financial system and support the flow of credit to where it is needed in the real economy.”
Osborne said he would also give details in the next few weeks of a scheme to boost private sector investment in infrastructure - a measure he says is possible due to Britain’s strict austerity plan.
Britain’s Conservative-led coalition government has leant heavily on the BoE to support the economy as ministers slash spending to reduce a record budget deficit.
Osborne said the BoE’s Financial Policy Committee, a new body charged with safeguarding Britain’s financial stability, would be required by law to support the government’s economic policy goals.
“I will make it a legal requirement for the FPC to report, for every action it takes, how that action is compatible with economic growth as well as stability,” he said.
Reporting by Matt Falloon. Editing by Jeremy Gaunt.