Green shoots are nothing but a mirage – for now

Beware the optimists calling a premature end to this financial crisis. A few days of better news in the credit markets has prompted talk of mustard seeds in the European and US economies, tiny signs of new growth in otherwise scorched fields.

On lunchtime television yesterday, the business minister Baroness Vedera talked to ITV of spotting "the first green shoots of recovery", earning herself a rebuke from the Tories that she had over-stepped the mark and been "unbelievable insensitive", considering the number of people being fired from their jobs.

The last thing banks care to do with the cash is lend it to struggling businesses

At about the same time on BBC2, the American commentator Irwin Stelzer surprised Andrew Neil, host of the Daily Politics show, with the news that that things were looking up on his side of the Atlantic - there were signs of business loans being granted, of the Libor index moving in the right direction.

Neil seemed taken aback by this sudden outbreak of good news in the credit markets - and rightly so. Since the beginning of the year, short-term lending to companies has indeed crept back to life and the insane risk aversion we saw for the last four months of 2008 has abated. The cost of borrowing has consequently shrunk a little.

And so it should have. With governments around the world flooding the financial system with taxpayer money, there had to be some sort of relief.

But has anything substantive changed? Absolutely not.

The Federal Reserve has warned that America's banks are going to need yet more money to survive. Bank stocks are already down 15 per cent in 2009. Retail numbers from Christmas were dismal, capping a dreadful year for almost everyone.

The only people for whom borrowing is easing are the bluest of blue chip firms. Even the slightest whiff of risk has lenders worried. As an individual borrower, try refinancing your mortgage or upping the limit on a credit card. It's not going to happen for a while.

Gordon Brown's latest offer to hand another £20bn to UK banks to lend to small and medium-sized businesses is all but meaningless if the banks don't lend it. And if you leave it to them, they won't.

On both sides of the Atlantic, banks have taken hundreds of billions in government money, used it to bolster their capital base and in some cases make acquisitions. The last thing they care to do with the cash is lend it to struggling businesses or individuals. Pricing assets, the precursor to lending, in this volatile environment remains next to impossible.

What our economies face now is a long trek through dangerous terrain. The green shoots for at least the next few months will be nothing but a mirage.