Thursday, October 22, 1998 Published at 12:34 GMT 13:34 UK
Business: The Economy
Governor tries to douse north's fire
The BofE Governor is facing calls for his resignation
The Governor of the Bank of England, Eddie George, has defended himself against calls for his resignation, saying his remarks which have provoked outrage in the north of England were "misinterpreted".
Mr George has released a statement saying: "I was disappointed to see the misinterpretation of my remarks.
"In fact, I said explicitly that rising unemployment in the north-east was undesirable."
Mr George made his original comment in answer to a question asked at the lunch on whether he thought job losses in the north were an acceptable price to pay for curbing inflation in the south.
Mr George is reported to have replied: "Yes, I suppose in a sense I am.
"It's not desirable, but the fact is we can only seek to affect through monetary policy the state of demand in the economy as a whole. It's only through monetary policy that we can determine what happens to the Labour market as a whole."
In his latest statement, Mr George has further clarified his position: "I made it clear that monetary policy can only target the economy as a whole, not particular regions or sectors, however uncomfortable that reality might be."
The cuts and others have prompted calls for significant cuts to interest rates and criticism that the Bank of England and the Government are ignoring the plight of manufacturers, especially those in the North.
Calls for Governor to resign
Some Labour MPs called on Mr George to resign as a result of his comments.
However, chancellor Gordon Brown has declared his support for Mr George in the wake of the controversy, and his Monetary Policy Committee over their interest rate decisions.
"I am happy with the way Eddie George and the Bank of England are doing their jobs and I support them in the difficult decisions they have made," he told the BBC's One O'Clock News.
The Labour MP for Rotherham, Denis MacShane, made the demand during a Commons debate on the steel industry.
His resignation call was met with cheers of "hear, hear" by Labour backbenchers and immediately endorsed by Labour's Llewellyn Smith (Blaenau Gwent).
Mr MacShane told the House: "I believe that statement exposes the fallacy of having our economy controlled and determined by the values of the City.
Before Mr George's clarification, Mr MacShane said: "I believe he may have been misquoted. If so, he needs to clarify.
'Out of touch'
A union leader claimed it was a "further nail in the coffin" of the credibility of the Bank's Monetary Policy Committee.
Roger Lyons, general secretary of the Manufacturing, Science and Finance Union, said: "The MPC has proved beyond doubt that it is out of touch with events in the real world.
"Eddie George has shown a complete disregard for the effects his policies are having on ordinary people and their families who are thrown on the unemployment scrapheap by his intransigence.
"The MPC must act now and follow the lead of the two members who voted for a larger cut at the October meeting and if they don't, the Chancellor should use his powers to replace them."
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