Britain will take part in a bailout for Portugal, EU finance ministers have agreed.
Part of an estimated £70 billion rescue package will, as expected, be drawn from a temporary bailout fund used for Ireland, requiring loan guarantees from all member states - even those not in the eurozone.
The arrangement was signed up to by the then chancellor Alastair Darling and fiercely opposed by his Tory shadow George Osborne.
Mr Osborne, now Chancellor himself and in Budapest for crisis talks on Portugal, insisted that he had achieved three UK objectives in agreeing preliminary arrangements for another bailout for a virtually bankrupt single currency country:
"First, there has to be an IMF package for Portugal before any European money can be committed. Second, I made it clear that, unlike the Irish case, the UK will not be making a bilateral loan to Portugal - British taxpayers' money will not be lent directly to Portugal.
"And third, we confirmed that while the previous Government committed us to the temporary EU mechanism, this Government has secured agreement that the UK will not be part of the permanent mechanism that will take its place from 2013."
Mr Osborne joined the meeting of eurozone finance ministers as Portugal lodged its formal request for a bailout, triggering efforts to get a joint EU-IMF financial package in place in the next few weeks without spooking financial markets and undermining the euro's credibility.
The Chancellor told BBC Radio 4: "It is a very, very unlikely that Portugal fails to pay the European Union, that the European Union fails to have enough money in its own budget and turns to countries like Britain and France to cough up money in that situation. That is a very theoretical risk," he insisted.
Shadow chancellor Ed Balls rejected Conservative criticism of the Labour deal requiring a UK commitment to any bail-out until 2013, pointing out that a Government document signed by Treasury minister Justine Greening acknowledges that the temporary bail-out arrangement received "cross-party consensus" even though the deal was done on behalf of the UK by Mr Darling.
Mr Balls went on: "The big issue is what is happening in the eurozone. Most people would say this is a problem for the eurozone, which should be paying a vast bulk of the money here."