Cameron: Eurozone crisis has 'chilling effect'

Updated: 2011-11-21 10:22


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LONDON - The crisis in the eurozone is having a "chilling effect" on the British economy, Prime Minister David Cameron said on Monday, as he set out a 400 million pound ($630 million) plan to help boost the housebuilding sector.

The initiative is likely to be one of a series of measures announced over the next week as the Conservative-led government aims to breathe life into an economy which risks returning to recession as activity dries up in the crisis-hit eurozone.

"Paralysis in the euro zone is causing alarm in the markets and having a chilling effect on economies in many countries - including our own," Cameron said in advance excerpts of a speech to the CBI business lobby.

"When the nightly news is about rising interest rates in Europe and uncertainty about the future, it is not surprising that that affects business and consumer confidence," he added.

"I am absolutely clear about the right answer for the UK economy. It can be summed up in one sentence. We need to deal with our debts and go for growth."

Finance minister George Osborne will make his autumn statement to parliament on Nov. 29, coinciding with a downgrading of growth forecasts from the independent Office for Budget Responsibility watchdog.

The coalition, in power for 18 months, has made cutting a budget deficit that peaked at 11 percent of national output its priority and has limited money available for investment projects.

It has earmarked precious funding to boost housebuilding in Britain which has slumped to the lowest peacetime level since the 1920s. The average age of first time buyers has climbed as many young people are priced out of the market.

"The housing market is one of the biggest victims of the credit crunch: lenders won't lend, so builders can't build and buyers can't buy," Cameron and his deputy Nick Clegg wrote in the foreword to a new housing strategy document for England.

It wants developers to compete for funds and plans to favour "shovel ready" projects, with the aim of starting building by July 2012. The fund could see the construction of up to 16,000 homes and support up to 32,000 jobs, it said.

The unemployment rate in Britain has risen to a 15-year high of 8.3 percent, data showed last week.

"Unblocking the market will provide a much-needed boost to employment," Cameron and Clegg aid.

"Second, these plans are designed to spread opportunity in our society. For too long, millions have been locked out of home ownership."

The industry welcomed the plans.

"This is a positive move by government," said Steve Turner of the Home Builders Federation.

"It clearly has recognised the need to boost house building, both to address the housing crisis and create jobs. The industry will work with government to find ways to increase supply," he added.

CBI Director-General John Cridland has been calling for the government to work with the private sector to encourage investment in infrastructure projects.

"I'm asking the British government for a bold package on youth unemployment, a bold package to get the housing market going and I want to see them helping British companies spend more on infrastructure," he told Sky News on Sunday.

British exporters must target fast-growing economies outside the euro zone and the United States to end years of underperformance and give the struggling UK economy a shot in the arm, the CBI said in a separate report.