Cameron 'frustrated' at EU bail-out obligations

David Cameron addressing MPs Mr Cameron blamed the Labour government for the UK's liability

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David Cameron says he is "frustrated" that the UK is obliged to contribute to future bail-outs of countries using the single currency until 2013.

The prime minister said the UK's hands had been tied by an agreement signed by the last Labour government in the days after the 2010 general election but before the coalition had been formed.

The Conservatives had strongly objected to the decision at the time, he added.

Ex-Chancellor Alistair Darling said the PM gave a "partial account" of events.

Both Tory and Labour MPs have expressed anger that the UK may have to give financial aid to Portugal after the country's Parliament rejected proposed austerity measures last week and its prime minister resigned in response.

UK ministers have insisted that Portugal has not made any request for external financial assistance and any speculation about what may happen in the future is unhelpful.

Crucial meeting

Updating MPs on the outcome of Friday's European Council summit, Mr Cameron confirmed that the UK was liable to contribute to an emergency support fund for EU members - including those in the eurozone - in financial distress.

EU members agreed to the fund at an emergency meeting in the first weekend of May 2010 - days after the UK general election resulted in a hung parliament - when they also approved a £95bn loan to Greece and a separate financial rescue fund for eurozone members, for which the UK is not liable

Start Quote

We should not have any liability for bailing out the eurozone”

End Quote David Cameron

Mr Darling conducted the negotiations on behalf of the UK at the meeting because coalition negotiations were still underway.

Mr Cameron said Mr Darling had taken the wrong decision during the meeting in Brussels and suggested he may have ignored advice given to him when he consulted with his Conservative opposite number and successor as chancellor George Osborne.

"It is a decision which the chancellor specifically objected to when it was taken by his predecessor after the election but before this government took office," Mr Cameron told MPs.

"Frustratingly, we are stuck with it for the duration of the emergency mechanism."

He added: "Britain is not in the euro and is not going to be joining the euro so it is right that we should not be involved in the euro area's internal arrangements."

"That is why I believe we should not have any liability for bailing out the eurozone."

'Incomplete account'

But Mr Darling said the prime minister had given a "somewhat incomplete account" of discussions he had had with his successor over the issue.

"We did indeed agree that we should do everything we could to keep Britain out of the main part of the rescue fund," he told MPs.

But he said he had talked to Mr Osborne about the merits of abstaining, rather than voting against, a proposal to require all EU members to contribute to the secondary European Financial Stabilisation Mechanism since it was clear the UK might be outvoted anyway.

"When he next refers to it perhaps he would give a whole account and not a partial account of what happened," Mr Darling told the prime minister.

Mr Cameron said his chancellor had told him that he made it "absolutely clear" at the time that this "was not something Britain should agree to".

The prime minister said he had insisted in subsequent negotiations that the UK's liability should be removed when a permanent replacement fund comes into place in two years time.

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