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UK Treasury chief George Osborne: It is most dangerous time for global economy since 2008
LONDON (AP) ' Britain's Treasury chief says the global economy is facing its most dangerous time since the banking crisis of 2008.
George Osborne told British lawmakers that the economic recovery "will take longer and be harder than had been hoped." But he said his government's austerity measures were the right way to respond to the challenge.
He said Thursday that global events "completely vindicate the decision of this coalition government ... to get ahead of the curve and deal with this country's record deficit."
THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.
LONDON (AP) ' Britain's Treasury chief George Osborne planned Thursday to defend his tough austerity plan after the Bank of England downgraded growth forecasts and warned of economic difficulties ahead.
Osborne was scheduled to address legislators at an emergency session of the House of called in response to rioting across England that saw four nights of widespread looting, arson and violence, which some blamed on tough budget cuts.
After returning from vacation in California, Osborne was expected to assure lawmakers that Britain is prepared to deal with any new crisis in the European banking sector.
In an op-ed article published in the Daily Telegraph on Monday, Osborne defended his plan to cut 81 billion (US$130 billion) from government spending through 2015, which will see public sector jobs lost and welfare programs slashed.
Some politicians, including London mayor Boris Johnson ' a member of Osborne's Conservative Party ' question cuts to police numbers being made under the austerity package. The country's police inspection service has said the cuts will mean 16,000 fewer police officers by 2015.
However, Osborne insists that budget restraint is necessary ' and has helped to restore market confidence in Britain.
"In the latest phase of financial turbulence, the interest rates on our government debt have fallen as market participants hail U.K. assets as a safe haven," he wrote in his op-ed.
"The alternative of more spending and yet more borrowing is now frankly ludicrous and places those who advocate it on the outer fringes of the international debate," Osborne said.
He acknowledged, however, that with a new bout of uncertainty in Europe over the financial health of France's banks, Britain was "not immune from global events and the instability on our doorstep."
In London, Britain FTSE 100 rose 2 percent to 5,108 after a fall Wednesday.
Bank of England governor Mervyn King had warned on Wednesday that it now predicted growth of 1.4 percent this year, down from the previous forecast of 1.8 percent.
"There are a number of headwinds to world and domestic growth over the forecast period, not least the private and public debt overhang," King said. "And these headwinds are becoming stronger by the day."