Economy eyed as new British cabinet holds first meeting

* Britain’s first coalition government for decades

* Must tackle record deficit, markets positive so far

By Mohammed Abbas

LONDON, May 13 (BestGrowthStock) – British Prime Minister David
Cameron was holding his first cabinet meeting on Thursday, with
rescuing the fragile economy the priority for the coalition

The centre-right Conservatives and smaller centrist Liberal
Democrats on Wednesday agreed on what critics call an unstable
partnership of expedience after an inconclusive election.

Reducing Britain’s record budget deficit of over 11 percent
of national output will be the first test of the relationship.

Markets will be looking for signs that the Conservative-led
coalition will quickly implement a plan to tackle the 163
billion pound ($243 billion) deficit by cutting public spending,
initially by 6 billion pounds this financial year.

Economists quoted by British media said they also expected a
rise in sales tax from 17.5 percent.

The government has promised an emergency budget within 50
days. Cameron said on Wednesday the government had the worst
economic inheritance of modern times.

Other legislation expected on the agenda soon is a plan for
a banking levy, a commission to investigate the possibility of
separating retail and investment banking, and plans to give the
Bank of England more clout as a financial watchdog.

The atmospherics of the new partnership between Conservative
leader Cameron and his new deputy Liberal Democrat leader Nick
Clegg dominated British newspapers, with most focusing on their
newfound friendship after weeks of sniping at each other on the
campaign trail.

Commentators warned of trouble ahead given the two parties’
traditional ideological differences and Britain’s lack of
experience with coalition rule. The new parliament includes a
large number of new members with little Westminster experience.

However, markets have so far reacted positively to the
commitment to make an early start on spending cuts. Turmoil in
the eurozone has also given British assets greater appeal.

Legislation will be introduced to give parliaments five-year
fixed terms, but parliament could still be dissolved if 55
percent or more of the House votes in favour.

The coalition government ends 13 years of Labour party rule
under Tony Blair and then Gordon Brown.

Key figures in the new government include finance minister
George Osborne, Vince Cable, the new business secretary, William
Hague, in charge of foreign affairs, Liam Fox with the defence
brief and Theresa May, the new home secretary. [ID:nLDE64B21R]

Osborne has become the youngest finance minister in over a
century and some in the finance industry have expressed
scepticism about his credentials. [ID:nLDE6440ZR]

(Reporting by Mohammed Abbas: Editing by Angus MacSwan)

Economy eyed as new British cabinet holds first meeting