Bank of England governor Sir Mervyn King has told MPs that UK economic growth will be flat for the next six months as the unfolding euro zone crisis threatens the country's recovery.
He told the Treasury Select Committee "painful adjustments" need to be made irrespective of how the problems in the euro zone pan out - but it would be better for changes to be made in "orderly way than a disorderly way".
The Governor and fellow colleagues from the Bank's Monetary Policy Committee (MPC) were discussing the findings of the quarterly inflation report published earlier this month, in which the body forecast a heightened risk of a double-dip recession.
The hearing came as the Organisation for Economic Co-operation and Development (OECD) warned the UK economy is set to contract in the final quarter of 2011 and first quarter of next year.
The BoE chief told MPs: "Going forward we are concerned that problems in euro area could lead to weaker exports than we expected."
In its quarterly inflation report, the bank slashed its central, or most likely, growth estimate to around 1% in both 2011 and 2012 - but compared to previous forecasts the Bank's projections reveal a greater chance of the economy shrinking in the first three quarters in 2012.
