Money Matters - Simplified

Britain may veer away from more borrowing

New York -- A failed auction of government debt in Britain appears to have pushed Prime Minister Gordon Brown into backing away from more borrowing, observers say.

In New York Thursday, Brown said there were three ways to stimulate the British economy, The Times of London reported.

"We're doing it by interest rates being incredibly low … our fiscal stimulus," and by "qualitative easing," he said.

Brown was cool to the prospect of further tax cuts as a stimulus measure, the Times said.
On Wednesday, Bank of England Gov. Mervyn King said it was questionable whether or not Britain could afford a second stimulus measure.

The Treasury's recent auction of $2.5 billion in government debt attracted only $2.3 billion in bids, the newspaper said.

"This holes Brown below the waterline," Bill Jones, a professor of politics at Liverpool Hope University said.

Jones said the prime minister's "whole strategy is based on borrowing and now he can't get anyone to buy his gilts," which are bonds issued in Britain. "This means the prospect of going cap in hand to the IMF (International Monetary Fund) hovers increasingly into view."

Copyright 2009 by United Press International.

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