King over the water

Mervyn King is hardly the only central bank governor of a high-deficit country to be facing off against his government. Many of his European counterparts are showing equal restiveness. In Spain, also ruled by a weak centre-left government, Miguel Angel Fernández Ordóñez has used strikingly similar language in ruling out further fiscal stimulus and in urging a return to budgetary sanity. Meanwhile, in Italy, where patience with prime minister Silvio Berlusconi is wearing thin, rumours abound that Mario Draghi, governor of the Bank of Italy, might be prevailed upon to head up a government of national unity. But Mr King’s differences with the Treasury and Financial Services Authority, the other two arms of the UK’s tripartite system of financial regulation, are of far greater importance. In testimony to a parliamentary committee on Wednesday, Mr King revealed the extent to which one of the world’s great financial centres has yet to recover its poise a full two years after the onset of the worst banking crisis in seven decades. Mr King’s claim that he has not even been consulted on the government’s forthcoming White Paper on reform of financial regulation and knows nothing of its contents does little for the credibility of the UK’s regulatory framework.

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