By Jim Hancock BBC Political Editor in the North West

But there was a ray of light on Thursday when MPs of all parties formed a lobby group to promote Capital of Culture 2008.

The government has pulled the plug on Merseytram

But will this be enough to lift the gloom in the city or do more problems lie ahead?

Recriminations continue about the failed tram scheme and the ruling Liberal Democrat group are searching for a new leader.

Mike Storey resigned last Friday after the Standards Board found he had brought his office into disrepute by undermining the chief executive Sir David Henshaw.

Now two brothers Eddie and Paul Clein plus Flo Clucas and Warren Bradley are contesting the leadership.

'Get act together'

Soundings indicate the experienced Paul Clein might edge out Mr Bradley.

But neither is expected to be able to work with Sir David Henshaw, so further turmoil can be expected.

It is embarrassing for Lib Dem leader Charles Kennedy whose party has made much of its recent victories in northern cities like Liverpool and Newcastle.

He was in Manchester on Thursday - another city in the party's sights.