A “big question mark” is hanging over the euro’s future and the continued uncertainty could spell problems for the British economy, David Cameron has warned.
The Prime Minister spoke as United States President Barack Obama put more pressure on eurozone leaders to find a quick solution to prevent the crisis spreading globally.
Refusing to rule out the possibility of a “double-dip” recession in the UK, Mr Cameron said: “These are very worrying times, I can’t hide that from you. It is a very difficult time for the eurozone. There is real turbulence in the markets, real question marks over whether countries can deal with their debts and a big question mark over the future of the eurozone.
“Our responsibility, my responsibility, is of course to try to help bring about a solution to these problems, but above all my priority is to try to keep the British economy safe.”
Mr Obama spoke on the telephone on Thursday night with leaders of the eurozone’s three largest economies – German Chancellor Angela Merkel, French President Nicolas Sarkozy and Italian President Giorgio Napolitano.
US Treasury Secretary Tim Geithner kept up the pressure yesterday, calling for swift action to implement a series of measures which the eurozone countries agreed at the end of October, including a one trillion euro bailout fund to help member states in difficulty.
After a meeting with representatives of Pacific rim economies, Mr Geithner said: “The crisis in Europe remains the central challenge to global growth.
“It is crucial that Europe move quickly to put in place a strong plan to restore financial stability.”
Much will depend on the actions of new technocratic governments taking power in Greece and Italy, where the eurozone’s economic problems appear most acute. Greece’s coalition government was formed yesterday, with Evangelos Venizelos retaining the key position of finance minister.
It will be led by a former vice-president of the European Central Bank (ECB), Lucas Papademos, who was appointed prime minister on Thursday.
The upper house of Italy’s parliament yesterday passed a package of austerity measures demanded by the EU. If backed by the lower house, the move will leave the way clear for Silvio Berlusconi to stand down as prime minister to be replaced by respected economist Mario Monti.
Deputy Prime Minister Nick Clegg said the technocratic governments should only be “temporary”.
“It would be a very bad precedent indeed if it was felt that somehow democratically elected governments can’t sort out the things for which they’ve been elected,” he added.
Mr Clegg said the situation in the eurozone was very, very serious.
“The clock is ticking,” he said. “We don’t have much more time to waste.”
Shadow chancellor Ed Balls called for the ECB to play a “much bigger role” in sheltering Italy from the markets, which have endured volatile trading after Italian bond yields surged above seven per cent and raised fears about the country’s ability to pay its debts.
“If you have a single currency in these circumstances where contagion is spreading, the central bank must be the lender of last resort,” Mr Balls said.
The chairman of the Commons European Scrutiny Committee, Conservative MP Bill Cash, warned that Europe was suffering the results of a “failed project” in which Germany was “predominant”.
“This is an undemocratic system,” Mr Cash said. “This is the problem and the people are protesting all over Europe.”
Opinion & Analysis: Page 15.