Foreign policy: economy is key

As business leaders gathered at the Mansion House last night, they would have been aware of one difference between the two countries: at least Britain is still in charge of its financial fortunes. Despite the public's concerns about the scale of the spending cuts, the UK still enjoys exchange rate and interest rate flexibility, a right that the Emerald Isle lost when it abolished the punt so it could join the euro.

Yet, given Britain's continuing predicament, there will be incredulity if it is left with a 7bn bill for any European-led rescue of the bedevilled Irish economy.

Voters did not sign up to this on polling day. Yet, in the impasse between the election and the coalition's formation, this is the deal that Alistair Darling, the outgoing Chancellor, signed on the country's behalf.

Having kept out of the euro – the best decision that Gordon Brown and Ed Balls ever made – Britain cannot afford now to start bankrolling those countries that have accumulated horrendous deficits; this country has enough debt problems of its own.

Herein lies the rub for the Prime Minister. If he is cautious with his economic interventions, he's accused of running Britain down. Conversely, there is an air of disbelief if he talks up the nation's finances.

As such, Mr Cameron must strike a careful balance. Though Britain has retained its credit rating, the risks remain – as illustrated by the Spanish premier's premature remarks, six weeks ago, that the eurozone debt crisis "has passed".

If only this was so. Yet, at the same time, the PM was right to remind both the G20 summit, and London's financiers last night, that the economy remains the most important element of foreign policy.

He was right to do so. Global trade links underpin every strategic alliance that Britain enjoys, far more so than the Nato-led war in Afghanistan, and these relationships need to evolve if the country is going to be in a position to do business with the new global powers like China, India and Brazil.

A more outward-looking approach, while preserving UK sovereignty, is the only way forward.