The Organization for Economic Cooperation and Development says the British economy will likely fall into recession this year and the largest economies on continental Europe will not fare much better. Meanwhile, British Prime Minister Gordon Brown unveiled plans to spend nearly $2 billion reinvigorating the country's ailing housing market, which is suffering its worst slump since the early 1990s. For VOA, Tom Rivers reports from London.
Economists define a recession as two quarters of negative growth and that is exactly what the Organization for Economic Cooperation and Development forecasts for Britain. The Paris-based organization predicts the British economy will actually shrink at an annual rate of three-tenths of one percent in the third quarter and two-fifths of a percent in the fourth quarter.
And the rest of Europe does not look much better. The OECD forecasts that the region's three other big economic powerhouses - Germany, France and Italy - will barely grow at all this year.
In Britain, the assessment is being countered with a handful of government incentive programs aimed at trying to stimulate the economy.
The biggest drag on the British economy is the housing market where mortgage approvals are down by more than 70 percent compared to just one year ago. Given the difficult market, Prime Minister Gordon Brown's government is eliminating the home-buyer tax - known as the stamp duty - on residential home purchases of less than $312,000. That rate would affect just less than half of all homes on the market in Britain.
"Homeowners need to know that we will do everything we can to keep the housing market moving forward - help with stamp duty, help for first time buyers, help to build more social housing, help to take unsold properties off the housing market and help with people who get into difficulties - these are the things that a government should do to help people as we come through a difficult situation and then show that our economy is resilient and will come these problems," he said.
Britain's Treasury Secretary Alistair Darling says the fact that tough economic times are being felt around the world does not make it any easier to cope.
"We are facing difficult times, you know we are in a situation where you have the combination of the credit crunch together with high oil and food prices and we have not seen that coming together. It is unique, which the IMF itself has said we have not seen this since the 1930s in fact," said Darling.
In addition to the elimination of the home-buyer tax on the lower half of the market, Darling says the government will also introduce a measure to help out first-time buyers on lower incomes and provide them with a free five-year loan worth up to nearly a third of the home's value.
Also, to combat the rising number of foreclosures, the government is unveiling a plan to protect vulnerable families who are at risk of having their homes repossessed. In some cases, the government would give money to such families to help with mortgage payments in exchange for an equity stake in the homes.