Eurozone crisis: Cameron backs euro but opposes more integration

 

UK Prime Minister David Cameron: "Urgent action is needed"

David Cameron has said he wants the euro to succeed but insists the UK will not be part of further integration seen as "necessary" to help it continue.

Speaking in Berlin, ahead of talks with Chancellor Angela Merkel, the prime minister said the UK's "healthy growth" was linked to the eurozone's fortunes.

But he said the UK would not underwrite Spanish and Greek bank deposits or support an EU-wide financial tax.

Mrs Merkel has suggested that further political union was a pre-condition.

Mr Cameron has said the uncertainty surrounding the eurozone is the biggest threat to global prosperity and a "whole series of measures" is needed to restore market confidence in the ability of countries to pay their debts and support banking liabilities.

Analysis

David Cameron has deliberately avoided piling direct pressure on Germany to shoulder all the responsibility, saying he felt it wasn't right to single out one government.

But he has sought to keep up the pressure in other ways by saying that time was of the essence and the eurozone crisis was the single biggest threat to the world economy.

That message has been backed up by President Obama, who called both the German chancellor and the Italian prime minister the diplomatic equivalent of banging heads together.

In truth, though, the urgency of the situation is not in doubt - it's the means to resolve it where disagreement can still be found.

For example, Germany doesn't like the idea of bailing out Spanish banks directly - Spain doesn't like the idea of taking money with strings.

David Cameron will have to tread a delicate path - being outside the eurozone club he cannot dictate terms, but he's also all too aware that a quick solution is vital for stability and growth at home.

The UK is pressing for a series of solutions, including a larger bailout fund, euro bonds and structural reform within the European Union - which could lead to greater fiscal burden-sharing between the poorest and wealthiest countries.

The prime minister said all Europe's economies, whether in the euro or not, needed a swift resolution of the current instability, and the single currency area as a whole needed to act to demonstrate it could "live within its means".

"We want the euro to succeed and the eurozone to solve the problems it faces so that all European countries - including ours - can get back to healthy growth."

The UK has welcomed plans set out by the European Commission to move towards a common "banking union" across the eurozone - which could allow central authorities to intervene before a bank gets into trouble to prevent taxpayers having to bail it out later on.

'Not our currency'

The prime minister said there was "no doubt" the eurozone would have to work more closely together on banking supervision and in other areas in future as "we know that it is necessary for the single currency to deal with these issues so it can work properly in the future".

But he stressed that the UK - which is not a member of the eurozone - would not be taking part and it was his job to protect British interests as Europe evolved.

"Because we are not in the single currency, we won't take part in the profound elements of that banking union. I wouldn't ask British taxpayers to stand behind the Greek or Spanish deposits. It is not our currency, so that would be inappropriate to do."

UK Chancellor George Osborne said he wanted to ensure safeguards were in place to protect Britain's financial sector if there were moves towards a banking union.

"There is no way that Britain is going to be part of any eurozone banking union," he told BBC Radio 4's Today programme. "I think Britain will require certain safeguards if there is a full blown banking union."

He stressed the UK coalition government's commitment to a referendum on Europe in the event of a "significant transfer of power and sovereignty" to the EU but said he did not believe that would necessarily happen as a result of the current negotiations.

Mrs Merkel told German television on Thursday that Europe needed "a political union first and foremost" and that individual countries must "cede responsibilities to Europe step-by-step".

But at a joint press conference with Mr Cameron, Mrs Merkel said different EU countries had taken part in different aspects of political and economic integration in the past, and this approach would continue.

 

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  • rate this
    -14

    Comment number 590.

    German growth has benefited hugely from being in the eurozone, to the disadvantage of less competitive South European economies. The real question is: would the UK not equally have benefited massively from being inside the eurozone from the start? By staying out, are we now only exposed to the bad repercussions of the crisis, without having been able to gain from the euro earlier, like Germany?

  • rate this
    +1

    Comment number 503.

    The Euro was a non staarter from the outset, as it is not possible for different economies to have the same interest rate,, because some will require higher rates to damp down inflation and others will require lower rates to stimulate their economies. The solution which now appears to have been realised is closer fiscal and political integration something similar to that appertaining in the US.

  • rate this
    +29

    Comment number 445.

    Yes the UK needs a successful eurozone, as we need global markets to be successful to buy our goods or services. This is separate from any question of whether the UK should be in the Eurozone. As it is such a mess, joining the Eurozone would be akin to boarding the Titanic before it hit the iceberg. We need the Euro to miss the iceberg whilst Sterling watches, in control of our own fiscal policy

  • rate this
    +14

    Comment number 341.

    As I see it, when countries signed up for the Euro they signed up to being one large economy. Only no one has ever acted like this, and each country continues to be individual. The Germans lend money but require it back as it's their money. But if the money wasn't a loan other countries would most likely spend it on German goods, and they get money back anyway. But maybe I'm just naive...

  • rate this
    +8

    Comment number 331.

    Seems that the Germans are in a terribly difficult position. They have already loaned enormous amounts of money to failing Euro countries. If they do not help these countries put together methods for repayment then they will lose the lot. This may mean lending more money short term. Then they run the risk of the countries changing direction and going bust anyway. Thank God for John Major.

 

Comments 5 of 13

 

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