Terry Murden: Amid the gloom, seeds have been sown for the recovery

SIR Mervyn King, governor of the Bank of England, capped another dire week with his warning that this could be the world’s worst ever financial crisis. But are there reasons to be cheerful?

The decision to pump-prime the economy with another £75 billion of bond buying looked like Plan B in disguise and there is no guarantee it will work. There is talk of quantitative easing hitting £500bn and that tells you how deep we are in the you-know-what.

Yet there are some bright lights shining in the gloom. As our feature on page five illustrates, plenty of Scottish businesses are in robust health, racking up orders, hiring staff and planning expansion. The so-called real economy seems to be running in parallel with broader problems.

How can this be? Well, the debt burden is weighing on sovereign states and the consumer is refusing to go on a high street spending spree. Banks are getting it in the neck for not lending. But a long list of companies are reporting growth in turnover, profits and dividends.

The downturn is impacting particularly on anything consumer related – principally the high street – and on construction. So anyone in the building chain is suffering badly.

But look at recent figures: record whisky exports, Scottish manufacturing exports up, huge investment in the renewables sector, 500 jobs announced on Friday by a Swiss bank that wants to be in Edinburgh, more investment into an R&D facility for the car industry in East Kilbride.

There is evidence that the depths of a slump are the time to start growing. In the early 1980s and 1990s the economy went into a tailspin but emerged even stronger. This downturn may prove to be deeper and we may yet plunge back into recession. But the seeds are being sown for the recovery. With a little nurturing they have a fighting chance to take root.

Banks fear has worrying echoes of Lehman Bros

THE credit-rating downgrade of a dozen banks, including Royal Bank of Scotland and Lloyds Banking Group, is not so much a warning as an acknowledgement of where we are in the restructuring process.

To that extent Moody’s is only recognising what has been evident for some time: that government support for the banks in the event of another failure can no longer be guaranteed.

But no-one realistically believes the Treasury would stand aside if RBS or Lloyds, in which it holds huge stakes, got into more trouble. The markets have priced in the possibility that other creditors should share any future risk.

However, European leaders meet again today to consider whether there is a need to recapitalise their banks.

It has spooked the markets, sending shares in the banks lower.

The problem for RBS and Lloyds is that they have been dragged into the eurozone crisis and are being assessed alongside some weaker banks and those with greater exposure to the ailing nations such as Greece. RBS has halved its Greek loan book and, along with other British banks, insists it is well-capitalised. The Chancellor, George Osborne, seems to agree.

A growing concern is that banks are once again fearful of lending to each other in case they don’t get repaid.

That has worrying echoes of 2008 and the circumstances that brought down Lehman Brothers.