After forecasts issued by the Ernst & Young ITEM club have deemed Britain’s economic situation as “worse than [we] thought,” a €2 trillion bailout is expected to be finalised next week to help stimulate economies in the eurozone.
However, if doubts continue over whether the bailout package will be sufficient, the International Monetary Fund (IMF) may be asked to provide assistance to indebted nations like Italy and Spain. If such a move is required, British taxpayers may have to accumulatively pay several billion pounds in additional taxes in 2011.
Other statements issued by Ernst & Young ITEM indicated that any “bright spots” highlighting the economic recovery of the UK have all but become a dim “flicker” due to the continuing euro debt crisis. In fact, the companies prediction for British economic growth rate during 2011 has been cut in half in the past six months. The new economic growth rate is forecast at only 0.9% for the entirety of 2011, which would mean almost no growth in the British economy for the remainder of the year.
Despite the Bank of England’s recent announcement that it would be devoting another 75 billion pounds towards quantitative easing efforts, Ernst & Young ITEM has stated that this move is unlikely to have a significant impact on Britain’s economic recovery, instead recommending that the BOE consider slashing interest rates from 0.5% to 0.25% as a more effective measure.
In addition to the pessimistic outlook for economic growth, Ernst & Young has also forecast that the unemployment rate in the UK may increase to more than 2.5 million before March 2013. Meanwhile, European leaders are expected to converge Sunday in a G20 summit that will discuss a €2 trillion rescue bailout package for the entire European continent. The proposed scheme may reveal new plans to help Greece, a severely indebted nation that may be allowed to file bankruptcy and default on a percentage of its debts.