‘Day of reckoning’ to sort out euro

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European leaders pledged to take the “necessary action” needed to secure global economic stability in talks with David Cameron.

The Prime Minister took part in a video conference call with key EU figures last night ahead of next week’s G20 summit of leading world economies as the eurozone crisis deepens.

The Mexico meeting will see leaders attempt to forge a united stance rather than agree any detailed decisions.

But former Prime Minister Gordon Brown issued a stark warning that the Los Cabos conference is the “last chance” to sort out the crisis and claimed it was reaching a “day of reckoning”.

Mr Cameron, German Chancellor Angela Merkel, French President Francois Hollande, Italian PM Mario Monti, Spanish PM Mariano Rajoy, European Commission President Jose Manuel Barroso and European Council President Herman van Rompuy agreed the need for international co-operation on growth was a priority.

Mr Barroso earlier said the euro and the “European project” were both irreversible, and EU leaders would “stay the course” in the midst of the crisis.

A Downing Street spokeswoman said: “The EU’s priorities for the upcoming meeting include ensuring effective co-ordination at the global level for strong, sustainable and balanced growth and the implementation of the G20 commitments on financial market reform.

“Leaders agreed the need for countries to continue to take the necessary action to secure global economic stability and to support growth.”

Mr Brown claimed the prospect of a “chaotic” Greek eurozone exit is becoming more likely regardless of the outcome of re-run elections in the country tomorrow.

France and Italy will follow Spain in needing a bailout as the eurozone crisis deepens, the former Prime Minister warned in an article for news agency Reuters.

“Whichever way the Greeks vote in Sunday’s election, a chaotic exit from the euro is becoming more likely: Its tax revenues are collapsing, not rising as promised,” he wrote.

“Unable to regain access to markets, Portugal and Ireland will soon have to ask for their second IMF programs.

“Sadly Italy – and potentially even France – may soon follow Spain in needing finance as the European recession deepens. Even German banks, which are some of the most highly leveraged, are not immune from needing more capital.”

In its latest assessment on Spain, the International Monetary Fund said the outlook is “very difficult” and the Government is likely to miss its deficit reduction target.

Speculation is mounting that central banks, including the Bank of Japan and US Federal Reserve, are preparing to launch emergency support measures to cushion the blow of a eurozone implosion following the elections in Greece.

Uncertainty surrounding the vote has left stock markets on edge. Success for anti-austerity parties, such as radical left-wingers Syriza, could lead to Greece leaving the euro, which would likely send stock markets into freefall.

Its exit from the euro could lead to contagion across the eurozone and beyond as the impact of a collapsed banking system and debt default in Greece spreads like a domino effect.

Cyprus said it faces the choice of asking for a bailout from its European partners or from Russia, and will decide where to turn after the Greek elections.

Germany is expected to come under intense pressure from G20 members outside the eurozone to take decisive action to stabilise the single currency by pushing forward with moves towards fiscal union.