Byline: James Chapman, Kirsty Walker and Hugo Duncan
BRITAIN is facing the 'economic equivalent of war', Vince Cable warned yesterday.
He spoke out as the eurozone crisis wiped [pounds sterling]28billion off the value of Britain's leading firms and experts predicted more tax rises and spending cuts.
In a deeply pessimistic speech to the Liberal Democrats' annual conference, the Business Secretary warned Britons that they are living in 'dangerous' times and said living standards were falling for the first time since the Second World War.
There are growing signs that the Coalition wants the Bank of England to try to jumpstart the economy with another round of quantitative easing - effectively printing money.
The Bank cannot lower its interest rate, already at a record low of 0.5 per cent, so there is speculation it will take the emergency step despite fears it could increase inflation.
Shares tumbled around the world yesterday amid mounting concern about the failure of European leaders to agree on a way to tackle the debt crisis that has engulfed Greece and is threatening the entire EU.
In London the FTSE 100 index fell 108.85 points, or 2 per cent, to 5,259.56, wiping [pounds sterling]28billion off the value of Britain's leading firms. The Paris stock market dropped 3 per cent and Frankfurt slid 2.8 per cent.
It is feared that Greece is on the verge of defaulting on its debts and quitting the single currency, which could plunge the West back into recession.
The International Monetary Fund is today expected to downgrade its forecasts for the global economy and warn that the crisis has entered 'a dangerous new phase'.
Speaking in Birmingham, Mr Cable said it was a 'painful' truth that Britain was a poorer country as a result of the financial crisis and admitted many of the country's problems were 'homegrown'.
He said: 'We now face a crisis that is the economic equivalent of war. This is not a time for business as usual; or politics as usual. The financial crisis is still with us. It never went away. And we can see that recovery has stalled in the U.S. and the position in the eurozone is dire.
'But it is wishful thinking to imagine that we have a healthy economy being infected by a dangerous foreign virus.'
Admitting his outlook was deeply pessimistic, Mr Cable said: 'When my staff saw my draft of this speech they said, "We can see the grey skies, where are the sunny uplands? …