Cameron warns over eurozone crisis
Published 18/06/2012 | 04:52
The crisis in the eurozone may rumble on "for some time", despite election results in Greece which look set to allow the country to remain in the single currency, David Cameron has warned.
Speaking at a G20 summit in Mexico dominated by the fallout from Sunday's elections, Mr Cameron urged the centre-right New Democracy party, which won the most seats, to move "decisively and swiftly" to form a new administration.
And the Prime Minister warned that "delay could be deadly". But he cautioned that even if the election results manage to get the eurozone past its latest crisis, further action is needed from the 17-nation bloc - and particularly Germany and the European Central Bank - to address the currency's fundamental problems.
The eurozone crisis topped his list of five key threats to global economic recovery, alongside protectionism, sovereign debt, failure to regulate banks and poor competitiveness. One senior diplomat said that the eurozone faces "a long, hard road that has got to be travelled" before its problems are over.
Mr Cameron said that G20 members would be putting "constructive pressure" on Germany at the two-day gathering to take decisive steps to resolve the long-running crisis.
But he acknowledged that Chancellor Angela Merkel faces political difficulties at home in delivering the economic changes - such as closer banking union and fiscal transfers to support weaker eurozone economies - which he believes are necessary to stabilise the single currency.
"We have to understand the German difficulties. It is very difficult politically to take the steps that are required economically," said Mr Cameron. "We decided not to take those steps when we didn't join the euro. But nonetheless if you want a functioning single currency you have to take at least some of those steps. You need to have elements of banking union, fiscal transfers and so on."
Mr Cameron said the eurozone faced three alternatives, the most positive of which would involve "action to strengthen the eurozone, to make it more coherent". Failure to take these steps would mean that "dominoes start to fall, which would have very severe financial consequences across the world and would seriously affect us", he said.
But he made clear that he was taking seriously the possibility that the eurozone will take "enough financial action and just enough political and economic action to keep the show on the road but without solving the fundamental problems", leading to the risk of "perpetual stagnation".
And he indicated that part of Britain's preparations for such an outcome involved building trade links with emerging economies like Mexico, to make up for lost business with traditional export markets in Europe. "It may be that the eurozone crisis is going to continue for some time, in which case the UK must do all it can to put its own house in order and link up with the fastest-growing parts of the world," said the PM, who has brought a 25-strong trade delegation of British companies to Mexico.