Cameron backs eurozone bank union in bid to restore stability

He told fellow EU leaders at a summit in Brussels that the UK backed the plan, including sweeping supervision not just for the biggest banks but smaller institutions too.

Later he set out the need not just for a single supervisor to govern the eurozone, but for a comprehensive system of resolution funds – to cover the wind-up of failing banks – and deposit guarantees to restore stability and credibility.

None of the measures would affect non-eurozone countries, but Mr Cameron was seeking assurances that further eurozone integration would not be at the expense of the single market.

In Greece, as well as a strike timed to co-incide with the summit, hundreds of youths pelted riot police with fire bombs, bottles and chunks of marble an anti-austerity demonstration descended into violence.

Authorities said about 70,000 people took to the streets of Athens in two separate demonstrations during the country’s second general strike in a month as workers protested against measures being negotiated with international creditors.

Riot police responded with volleys of tear gas and stun grenades in the capital’s Syntagma Square outside Parliament during the clashes, which lasted for about an hour.

A 65-year-old man suffered a fatal heart attack and four demonstrators were injured after being hit by police. Seven people were arrested.

The strike shut down public services, closed schools, hospitals and shops and hampered public transport. Taxi drivers in Athens joined in for nine hours, while a three-hour stoppage by air traffic controllers led to flight cancellations. Islands were cut off as ferries stayed in ports.

On Sunday, German chancellor Angela Merkel said she thought that debt-laden Greece is making progress in implementing reforms and austerity measures “step by step”.

In her weekly video podcast published, she said Greece’s progress is slower than hoped “but on this matter we should always give Greece another chance”.

Earlier, as he was arriving at the summit the Prime Minister said: “We’re in a global race. We need to make sure that we’re competitive, we need to make sure the European Union is competitive. And that means deregulation, cutting the costs of regulation, supporting enterprise, it means doing trade deals with the biggest economies in the world, the United States of America, Japan, the fastest growing countries in the world.

“And above all it means completing the thing that matters most for us in Europe, which is the single market. That could be an engine of growth and there’s more work to be done.”

The UK pressure to keep up the pace in the face of the continuing economic crisis in Europe came as French President François Hollande effectively told the UK and Germany not to try to dictate to the eurozone.

In an interview published in a group of newspapers across Europe, Mr Hollande said: “Certain countries don’t want to join (the eurozone): that’s their choice.

“But why should they come telling us how the eurozone should be run?”

In contrast, Mr Cameron’s case is that measures being taken inside the eurozone must be closely studied to ensure they don’t impinge on the rest.

He was even hinting at UK support for a separate budget for the 17 eurozone countries in future – although the idea is far off and for the moment Mr Cameron says he cannot see how it could be introduced without implications for the wider EU budget.

Before the summit began, Mr Cameron held talks with his anti-federalist European political bedfellows, including the leaders of the Poland’s Law and Justice and Poland Comes First parties and the Civic Democratic Party of the Czech Republic.

The parties formed a new political bloc in the European Parliament after Mr Cameron took his MEPs out of the mainstream centre-right grouping, the European People’s Party, in 2009.

The move was branded at the time by the then Labour Foreign Secretary David Miliband as a UK Tory partnership with “unsavoury allies”.

Yesterday Mr Cameron and other ECR leaders put their names to a statement on the eurozone crisis declaring: “The euro area crisis has prolonged the financial and economic crisis for the whole EU.

“It is therefore essential that all members of the EU and particularly members of the euro area pursue economic reform and re-establish sound public finances as the basis for long-term recovery and a return to prosperity.”