UK set for recovery, Krugman hints

Britain is the best-placed of Europe’s large economies to recover from the recession, Paul Krugman has said.

The winner of the Nobel prize for economics in 2008 said that the UK has a strong competitive advantage due in part to government actions to tackle the financial crisis, the Observer reports.

Last October, the Treasury launched a £37 billion bank recapitalisation plan aimed at shoring up the credit crunch-hit banking system, with three firms - RBS, Lloyds TSB and HBOS - part-nationalised as a consequence.

The Bank of England has also launched radical policy actions to combat the downturn, with lending rates slashed to 0.5 per cent and a £125 billion quantitative easing programme well under way.

These factors, along with the recent weakening of the pound, were cited by Professor Krugman as the potential drivers of an economic turnaround unique to the continent.

’The UK has achieved a lot of monetary traction in the way that no one else has through the depreciation of the pound. In effect, you’ve carried out a successful beggar-my-neighbour devaluation,’ he told the newspaper.

’I think the UK economy looks the best in Europe at the moment.’ADNFCR-2318-ID-19218712-ADNFCR