Default fears: Need for stress tests 'urgent'

Financial regulators also need to be much more vigilant and monitor banks daily to ensure they are not taking undue risks and can withstand defaults, he added..

He said the austerity measures imposed by governments in countries like Greece meant growth was unlikely and this posed a real risk to the wider banking system as they may not be able to service their debt, let alone repay it, the Labour MP told the BBC.

He said he warned in the summer that the European Commission's stress test for banks to see whether they could withstand defaults on loans was "completely ignoring" the connection between banks from different countries.

Mr Darling said: "I think it's a matter of principle that the eurozone countries should be responsible for supporting the euro but that only gets us so far down the road."