Financial Crisis

Part of the debate – in the House of Commons at 3:36 pm on 20th January 2009.

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Photo of Stephen Timms Stephen Timms Financial Secretary (HM Treasury) (also in the Department for Business, Innovation and Skills) 3:36 pm, 20th January 2009

I beg to move,

That this House
takes note of European Union Documents No. 14938/08, Commission Communication: From financial crisis to recovery: A European framework for action and No. 16097/08, Commission Communication: A European economic recovery plan, and endorses the Government's approach to discussions with European partners on these issues.

I welcome the opportunity to debate the Government's approach to the European economic recovery plan, alongside the related European Union documents. The world economy is in a serious downturn arising from financial system dislocation. The size and speed of that downturn warrant substantial and immediate action from Governments. Developments in the United States sub-prime mortgage market were the original trigger for the distress in the financial markets that escalated throughout last year, leading on to a severe downturn in economic activity across the world.

What began as disruption to the functioning of specific credit and money markets has spread and intensified to the extent that all financial markets have been affected. Financial institutions and financial systems in both developed and emerging market economies have been placed under severe pressure and, as credit conditions between banks have become tighter, their ability to lend to businesses and consumers has been restricted. That scarcity of credit for businesses and consumers has further contributed to the downturn and produced a real effect on the lives of individual citizens at home and in other countries, too. That is why it is right and necessary for Governments across the world to take bold action now to support the economy. My right hon. Friend the Chancellor of the Exchequer yesterday set out the further measures that the UK Government are putting in place.

In October, we took the lead with steps to stabilise the banking system. The euro-area summit of 12 October agreed a co-ordinated approach based on the UK model. In the pre-Budget report, my right hon. Friend the Chancellor announced measures worth around £20 billion between now and April 2010. That fiscal stimulus includes timely, temporary and targeted measures to support demand and to provide real help to people and businesses through these difficult times.

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