Cameron calls for decisive action over eurozone crisis

UK Political Editor

Tuesday 19 June 2012

DAVID Cameron last night warned inaction in tackling the eurozone crisis could result in either "perpetual stagnation" or the death of the euro.

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michael settle UK POLITICAL EDITOR

The leader of Greece's centre-right New Democracy party began a race against time yesterday to form a pro-bailout coalition as fresh fears about the Spanish economy triggered a pummelling for bank shares.

And speaking from the G20 summit in Mexico, Mr Cameron called on Antonis Samaras to act swiftly and decisively, warning: "Delay could be deadly."

An initial upbeat market response to New Democracy's narrow victory in Sunday's elections quickly dissipated as concerns remained about the eurozone's ability to solve its underlying problems. Spain's borrowing costs rose to a record high, just above an unsustainable 7%. Mr Cameron said the Greek people had "made their choice to stay in the euro" by backing New Democracy and a government should now be formed which is prepared to deliver on promises made in return for multibillion-euro bailouts. However, he also called on the other eurozone countries, particularly Germany, as well as the European Central Bank, to take "bold steps" towards the fiscal and banking union which he believes are necessary to solve the underlying problems with the single currency. The PM said: "The Greek people have now made their choice to stay in the euro, to accept the consequences of what that involves. "Those parties that believe they need to get into government need to deliver that. "Delay is always dangerous in these situations. It is in our interests in Britain that these issues are resolved decisively and swiftly and that is what we are urging people to do today." A spokesman for Angela Merkel said the German Chancellor regarded the Greek election results as "good news for the euro, for the eurozone and for Europe". Yet she made clear her government was not willing to countenance any relaxation in the demands placed on Athens for austerity measures in return for its bailout. She said: "The important thing is that the new government sticks with the commitments that have been made. There can be no loosening on the reform steps." However, as the G20 leaders gathered for their dinner last night, Germany was coming under intense pressure, particularly from the UK, US and China, to use its financial clout to underwrite a plan to stabilise the single currency. In a speech, Mr Cameron outlined how there were five big threats to the world economy – the eurozone crisis, sovereign debt, protectionism, low growth, and the failure to regulate banks. He insisted it was now up to the eurozone countries to decide whether or not they were "prepared to make the sacrifices" necessary to pull themselves out of the crisis. He said: "The eurozone has two choices. "Either they try to force down wages and prices in the periphery as fast as they can to restore competitiveness with all the political and economic tensions that will entail, or the core of the eurozone has to do more to support the periphery through greater fiscal burden-sharing together with a longer term system of collective support and collective responsibility such as greater transfers between eurozone members. "Either way, the path would be made easier by more being done to support demand through greater monetary activism by the European Central Bank. "The alternatives to action that creates a more coherent eurozone are either a perpetual stagnation from a eurozone crisis that is never resolved or a break-up caused by a failure to address underlying economic fundamentals that would have financial consequences that would badly damage the world economy, including Britain." The FTSE-100 surged more than 1% in early trading after pro-bailout party New Democracy secured its narrow win in yesterday's vote, giving the embattled country more time to remain in the eurozone. However, any benefit proved short-lived as uncertainty over whether the party would forge a coalition Government combined with a worrying rise in Spain's borrowing cost to levels that previously forced Greece, Ireland and Portugal to seek bailouts. Royal Bank of Scotland was down 5%, with Barclays and Lloyds also suffering hefty falls.

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Cameron calls for decisive action over eurozone crisis

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