We’re in even more danger than before, warns Alistair Darling

THE DANGER of a fresh banking meltdown in the new year is “still very much there”, former chancellor Alastair Darling has warned.

His warning came as Liberal Democrat Deputy Prime Minister Nick Clegg said there would be “many great challenges” for everyone because of the flatlining economy, with the “real risk” of Britain tumbling back into recession underlined in a separate think-tank report.

Mr Darling, the Labour MP for Edinburgh South West, hinted that world leaders had grown complacent about the looming threat. “Going back to 2008-2009, the world did come together to avert what could have been an awful meltdown at that time,” he said yesterday.

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“The current generation of those in power seem to have forgotten the lessons of just three or four years ago.”

Mr Darling said 2008 had been “very much about trying to stop a catastrophe in the banking system” and the world economy had not been fixed.

He added: “I just see the situation getting worse and worse unless countries recognise that unless you get growth going again, you are never going to get your borrowing down and therefore you won’t get your debt down. That is why I regard the situation as we are going into 2012 as being far, far more serious in many ways than the problems we faced in 2008.”

Meanwhile, the Deputy Prime Minister said the UK had been “pulled back from the brink” but the “economic rescue mission” remained the coalition’s number one priority.

“We only need to look at what is happening in countries on our European doorstep to see what we could have ended up dealing with in 2011,” Mr Clegg said.

“But that economic rescue mission is not over yet and there is much more we must do. That’s why, thanks to the Liberal Democrats, the government has been helping people get through these difficult times with measures to make life fairer and easier.”

A report by the Institute for Public Policy Research (IPPR) said the only good news for consumers was an expected fall in inflation, which would ease the squeeze on spending power in those households which remain in work.

The think tank’s chief economist Tony Dolphin said: “As we enter 2012, it seems the word that best describes the outlook for the UK economy is ‘bleak’.

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“The eurozone crisis is unresolved and country after country is being forced to adopt extreme austerity measures that will result in large falls in output.

“As a result, the whole eurozone economy is believed to be back in a mild recession.

“Going into 2012, the risk is that talk of austerity at home and crisis in Europe will dampen spirits to such an extent that the economy drifts into recession.”