WE WELCOME news that an agreement has at last been forged between the government and banks which should improve lending to businesses.

We argued some time ago that the reluctance of banks to lend money was stifling any hope of a quick economic recovery.

We understand that bankers felt they were on the receiving end of mixed messages; being told on the one hand to be more responsible with lending, while at the same time being criticised for restricting lending.

But we do believe that Project Merlin will be good news for business large and small up and down the country.

Under the deal banks will lend about £190bn to businesses this year - including £76bn to small firms.

The Bank of England will monitor whether the targets are being met.

The deal may not be enough to satisfy the many public critics of banks, especially those who see the bankers' behaviour as central to the financial crisis.

But, we are where we are and while retribution may be popular, recovery has to be the focus at this point.

The banks are surely under no illusion that massive bonuses to staff will not endear them to a public which in some cases bailed them out.

But likewise the public may just have to accept that the banks have to be able to compete in a hugely competitive global financial market and if that means paying bonuses to keep the best staff, then that is something which is not going to end any time soon.