Britain's credit 'riskier than McDonald's' as sterling continues euro slide - by Hugo Duncan
Sterling slid to a new all-time low against the euro this morning as the markets rated Britain a greater credit risk than the fast food chain McDonald's. At its low point, one pound bought just under 1.14 euros - its weakest-ever showing against the single currency and a blow for holidaymakers planning festive trips. It comes as growing concerns over a lengthy recession heighten the prospects of UK interest rates falling to all-time lows below 2 per cent next year, putting pressure on the pound.Today the National Institute of Economic and Social Research think-tank said Britain's economy shrank by 1 per cent in the three months to November as the pace of the downturn quickened.
The Government has also provided billions of pounds of funding to the UK's banking sector to boost lending to homebuyers and small businesses. It is being paid for by hundreds of billions of pounds of extra Government borrowing which has resulted in Britain having a worse credit rating than McDonald's and other large companies. Investing in Government debt is now almost twice as risky as buying McDonald's corporate bonds, according to the market in credit default swaps, a form of insurance for buyers of such debt. Professor Stephen Haseler, director of the Global Policy institute at London Metropolitan University, said the pound could soon be worth $1 as an 'unfortunate consequence' of Government plans to spend its way out of recession. 'Britain is already in a full-scale sterling crisis,' he said.
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