Before last night’s confidence vote in Greece, which could trigger a snap election, the Prime Minister gave a stark warning of what a protracted eurozone crisis could mean for the UK.
Looking rather downcast at his end-of-summit press conference, he said Britain had weathered the “first stage” of the global economic storm.
But then he told reporters: “It is in Britain’s interest that the eurozone crisis is sorted out as rapidly as possible. It is having a chilling effect on our economy and for every day it goes on not resolved, it is a day that is not good for our economy.”
Clearly frustrated, Mr Cameron then issued a direct challenge to Athens.
“The Greeks have to decide. Do they want to stay in the eurozone, accept the debt reduction package that was negotiated and make it work for them within the eurozone, or do they want to take a different path?
“What they can’t do is string this out endlessly with another round of conversations, discussions and negotiations. The world can’t wait.”
However, the PM warned if Greece ditched the euro and returned to the drachma, then there “would be bad effects that would be felt across Europe, including in the United Kingdom, for obvious reasons”.
“And because of that it’s right that we should have proper plans in place, contingency plans, to deal with any and all eventualities and that is exactly what the Treasury has done”.
He added: “We want this resolved; we want it resolved quickly.
“The elements of any resolution have got to include decisive action on Greece, recapitalising banks and establishing the firewall. These are fundamentals.”
As Mr Cameron delivered his downbeat assessment, stock markets were falling, reflecting renewed feeling the instability shaking Europe will not be resolved any time soon.
Earlier, new data showed eurozone services contracted even more than initially reported in October as the debt crisis continued to sap business confidence.
With 50 being the line over which countries are growing and under which they are contracting, the new figures put France at 44.6, a 31-month low, Italy at 43.9, a 28-month low and Spain at 41.8, a 27-month low.
While Mr Cameron insisted an agreement had been reached on bolstering the International Monetary Fund’s lending capacity, it was clear key details had not been agreed.
The US, among others, was not prepared to bolster the IMF given that, as German Chancellor Angela Merkel herself admitted, “there are hardly any countries here which said they are ready to go along with the EFSF” – the eurozone’s own bailout fund. Mr Cameron readily accepted an enhanced IMF fund to stop future Greek-style crises taking hold would involve a bigger contribution from Britain.
At present, the UK’s contribution is £29 billion, of which £5bn is currently used. MPs agreed in July – but only by a majority of 28 – to almost double this lending capacity to the IMF to close to £40bn.
Significantly, Mr Cameron told reporters any UK increase would be within the “extra head room” agreed by Westminster – meaning there would not be the need for a new vote.
This is certain to put him on a collision course with Conservative eurosceptics, who are already kicking up a fuss on the issue of a referendum on Europe.
Last night, Nigel Farage, leader of the anti-EU Ukip, said: “The UK is undergoing austerity measures yet the Government is happy to commit cash we do not have to the IMF. Once again, we are being taken as mugs.”
Mr Cameron stressed the G20 leaders had agreed an action plan for growth and jobs, including many of the things Britain was already doing such as fiscal consolidation, monetary activism, getting rid of barriers to business and job creation as well as taking action to tackle protectionism.
US President Barack Obama also sought to put a positive gloss on the two-day summit on the French riviera, insisting: “Important progress has been made to put our economies on a firmer footing.”
However, no agreement was reached on a financial transaction tax even though the event’s host, French President Nicolas Sarkozy, insisted: “France will fight for that tax to become a reality.”
While immediate attention focuses on Greece, concerns are growing over Italy. Pressure is mounting on Prime Minister Silvio Berlusconi to stand down.
While his Government asked for the IMF to monitor implementation of its economic reforms, it refused an offer of financial aid.
Despite Italy’s debt being 116% of GDP, Mr Berlusconi, bullish as ever, insisted: “It is not necessary.”