UK reels from crisis even as FTSE recovers
Financial chaos continues to surround the UK economy today, even as the FTSE index continues to show sustained signs of recovery.
Northern Rock, the bank taken over by the government last February, was today turning away savers after customers realised they were the only bank in the country offering complete protection to deposits.
“Recent turbulence in financial markets has led to a sizeable inflow of retail deposits, particularly in recent days, and Northern Rock is therefore taking further action to moderate its product range and product pricing, to uphold its competitive commitments,” the company said.
Cash has also been flowing from Britain to the Irish Republic after its parliament approved legislation guaranteeing the liability of Irish banks.
The president is expected to sign the bill into law later today but questions are being raised in both London and Brussels about whether the law by-passes competition and state-aid rules.
Brussels is dealing with its own fractures today as the German finance minister, Peer Steinbruck, indicated Berlin would not sign up to France’s call for an EU-wide response to the crisis.
In an interview with the Wall Street Journal, Mr Steinbruck said: “To put it mildly, Germany is highly cautious about such grand designs for Europe.”
An emergency EU summit is planned for Saturday.
Downing Street has confirmed the prime minister will attend the summit, which will be held in the Elysee Palace in Paris.
But the prime minister is understood to be opposed to any form of US-style European bail-out of failing banks.
Mr Brown’s spokesman said: “President Sarkozy confirmed to the prime minister that it was not the case that the French were proposing a Europe-wide bail-out.”
The continued chaos comes despite US senate approval of the Bush administration’s $700 billion bailout package.
Senators, including White House nominees Barack Obama and John McCain, voted in favour of the rescue plan to a majority of 74 votes to 25.
But before the package can be passed into law it must be voted on by the lower house of Congress.
That news did seem to consolidate the FTSE index, which continued its rally in early trading, opening 31.7 points higher at 4,963.47.
Reassurances from the banks, a major investor and the prime minister have helped buoy confidence in HBOS, with shares rising 21 per cent this morning to 148.10p.
