The problem is that, under EU law, the minimum level for VAT is 15%. Of course, they could make more/all things VAT-exempt, which would get around that, but hell is not showing any signs of a temperature drop just yet.
The problem is a self-fullfilling prophecy: the banks won't lend amongst themselves, so the LIBOR rate is still up, which makes mortgages more difficult to obtain, means people can't move, prices drop, lenders become more reluctant to lend, prices drop further, increased reluctance to lend, prices drop still further....and in amongst all that, banks see our assets/collateral values dimishing, won't lend amongst themselves, LIBOR rate stays high...and around we go again...