LONDON: A bailout of a big British mortgage bank caused shudders among account-holders and investors alike Friday, opening a new phase in the global financial turmoil that emanated from a shakeout in the U.S. home lending business, analysts said.

Depositors flocked to withdraw money after the bank, Northern Rock, unable to raise funds from its usual sources - capital markets - because of the global credit crunch, turned to the Bank of England for an emergency loan. Northern Rock shares plunged more than 30 percent, prompting a broader sell-off in European stock markets.

While other European banks have gotten burned by investments tied to shaky U.S. mortgages, known as subprime, Northern Rock said it had only a small subprime exposure in its portfolio. Instead, the bank ran into trouble because the credit squeeze undermined its business model. Northern Rock relies heavily on raising money in the capital markets, rather than consumer deposits, to finance its mortgage lending.

“The problems are potentially much wider now,” said Jonathan Loynes, an economist at Capital Economics, a consultancy in London. “This means we have to worry about a wider range of institutions that arent directly involved in this credit crisis but are in a way innocent bystanders.”

The British government said it had authorized the Bank of England to provide a “liquidity support facility” of unspecified size to Northern Rock, based in Newcastle, England, which has expanded aggressively in recent years.

The news prompted a sell-off in the shares British banks as investors worried about the possibility of similar problems at other institutions - as well as threats to the broader economy. The FTSE 100 index was down more than 2 percent at midday but recovered to close down 1.17 percent. Shares elsewhere in Europe fell less sharply.

“I dont think the worst is behind us,” Jean-Claude Juncker, who chaired a meeting of European finance ministers and central bankers Friday, said during a news conference in Porto, Portugal, Reuters reported.

The U.S. Federal Reserve and the European Central Bank have been under pressure to keep key interest rates low or even cut them as the market turmoil threatens to choke economic growth. The Bank of England has raised its rates several times in recent months to try to cool a frothy housing market, which while driving economic growth has also raised fears of a bubble.

The emergency loan to Northern Rock came only two days after Mervyn King, the governor of the Bank of England, warned that moves by other central banks, like the Fed and ECB, to pump extra cash into the financial system in recent weeks could encourage “excessive risk-taking” by rewarding bad behavior.

On Friday, the Bank of England emphasized that Northern Rock would have to pay a premium to market interest rates for its emergency credit line, offered under the central banks role as “lender of last resort.”

“Northern Rock is solvent, exceeds its regulatory capital requirement and has a good quality loan book,” the Bank of England, the Financial Services Authority and the Treasury said in a joint statement.

But those words failed to soothe some Northern Rock customers. Account-holders rushed to branches throughout Britain, many of them reportedly withdrawing large amounts of money.

Outside a Northern Rock branch in central London, Constance Hackford, a manager at an interior design firm, weighed joining a line of about two dozen people.

“I cant imagine the Bank of England is going to let it fail - can they?” she said. “Ive got rather a lot of money in there. Maybe I should spread my bets a bit.”

A spokesman for Northern Rock said Friday afternoon that the bank did not have any estimates yet of the amount that had been withdrawn.

Because Northern Rock - and, perhaps, other British mortgage lenders - will now have to pay more to raise money for loans, they will have to pass along higher interest rates to consumers, analysts say. That will cause a slowdown in lending, they added, which could act as a drag on the housing market in Britain, which has soared over the last decade.

“Costs for first-time borrowers, already stretched in the affordability stakes, will rise substantially,” said Paul Mortimer-Lee, an economist at BNP Paribas. “First-time buyer activity seems pretty certain to show a sharp fall, which, since the whole market rests on the shoulders of the first-time buyer, is like throwing a spanner in the works of the whole market.”

There have been some signs of a slowdown lately. A survey released this week by the Royal Institute of Chartered Surveyors, a real estate group, showed that prices in August fell in more areas of Britain than they rose. And several British banks have already increased raised their lending rates in recent days.

The maverick anti-war MP George Galloway is threatening to stand against former foreign secretary Jack Straw in Blackburn at the next general election.

Mr Galloway, a former Labour MP, ran against, and beat, Oona King in Bethnal Green & Bow in one of the shock results of the 2005 election.

But he promised then to only serve one term and is now looking at “a number of possibilities” at where to fight the likely 2009 election on his Respect ticket.

At a meeting in London last week he at first refused to say where he was hunting for a winnable constituency, before admitting: “I have been seen in the Blackburn area quite a lot recently.”

Mr Straw, who is now the leader of the Commons, was foreign secretary at the time of the Iraq war in 2003.

He was sacked as foreign secretary by Tony Blair in 2006, with speculation that his tour of his constituency with the US secretary of state, Condoleezza Rice, which saw large anti-war protests dog their steps, had sent jitters through the US administration.

At the 2005 election, the former UK ambassador to Uzbekistan, Craig Murray stood as an anit-war independent against Mr Straw but came a distant fourth - behind the British National party.

However, although he retained the seat, Mr Straw lost more than 5,000 votes. An MP for Blackburn since 1979, Mr Straw is famous for conducting “soapbox” question-and-answer sessions in the centre of the Lancashire town.

Mr Galloway’s Respect party has established a foothold in Tower Hamlets council with 11 councillors, but has no one on Blackburn council.

Mr Galloway stressed he had not yet made a definite decision, adding “I’m keeping [it] under my hat at the moment.”

He also confirmed he would run for the European parliament in 2009 on the London list.

He was speaking at the Frontline Club of foreign correspondents in London.

Affordable rent, low-cost labor and population literacy are the main reasons why companies still prefer to set up their delivery centers in Indian cities like Mumbai and Bangalore. But this offshoring trend is likely to change in the near future, according to a study by IDC.

The analyst group forecasted that Chinese cities will soon overtake their Indian counterparts as top destinations for offshore global delivery by 2011, based on the results acquired from its Global Delivery Index (GDI).

The GDI compares 35 cities in the Asia-Pacific region as potential offshore delivery centers based on a set of criteria such as labor and rental costs, language skills and turnover rate. Cities covered by the index include Adelaide, Bangalore, Dalian, Hanoi, and Kuala Lumpur.

According to IDC research manager for Asia-Pacific BPO Research Conrad Chang, what differentiates the leading cities from the rest is “the focus on deal-clinching factors”, including agent skills and political risk.

“There are different risk factors to consider when evaluating outsourcing, offshoring, onshoring, and nearshoring,” explained Chang in a statement Tuesday. “Some factors are obviously more critical than others.”

Chang also noted that while Indian cities scored high on the criteria set by the GDI, the picture could well be different four years from now.

Although the top ranked Chinese cities–Beijing, Shanghai and Dalian–trail their Indian counterparts in the GDI this year, they are expected to overtake the competition by 2011.

IDC attributed this to China’s massive investments in areas favorable towards offshoring, such as infrastructure development, technical skills as well Internet connectivity.