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Osborne in eurozone economy warning


George Osborne

George Osborne

George Osborne

Britain's prospects for economic recovery are being "killed off" by the crisis in the eurozone, Chancellor George Osborne has warned.

In a stark message to the leaders of the 17-nation single currency bloc, Mr Osborne said they were facing a "moment of truth" which could determine the future of the entire continent for years to come.

In some of his strongest comments to date, the Chancellor voiced his exasperation at the repeated failure of the eurozone nations to find a permanent solution to end the financial turmoil.

Writing in The Sunday Telegraph he said: "The lesson of the last two years is that treating the latest symptom does not cure the underlying conditions."

While there were signs a solution to the latest bout of uncertainty in the Spanish banking system was on the cards, Mr Osborne said it would not be enough to end the threat to the UK economy.

"Our recovery - already facing powerful headwinds from high oil prices and the debt burden left behind by the boom years - is being killed off by the crisis on our doorstep," he said.

"I know from talking to British businesses that our country is bursting with entrepreneurial spirit and exciting investment plans that are being held back because of uncertainty about the future. That's why a resolution of the eurozone crisis would do more than anything else to give our economy a boost."

He again underlined the need for greater fiscal integration - with more pooling of financial resources and the creation of a banking union - across the currency bloc, saying: "The solution in the eurozone doesn't have to be a full-blown United States of the Eurozone, but if it is to be successful it is likely to include most of the mechanisms that make other currencies work."

Former defence secretary Liam Fox said if there were further treaty changes, a referendum on Europe would be inevitable. He said he favoured cuts to public spending to fund tax cuts. Speaking to Dermot Murnaghan on Sky News, Dr Fox said: "The whole eurozone problem was entirely predictable. They wouldn't decide whether it was a political project or an economic project. They are still not doing so."

Tory backbencher Douglas Carswell said Mr Osborne could not blame Britain's struggling economy on the eurozone. "The idea that it is all the fault of the eurozone is demonstrably wrong," he wrote on his website. "It is not the eurozone crisis that we should blame for our awful economic performance, but the almost total absence of domestic economic reform, coupled with the Treasury's absurd belief that monetary stimulus can engineer growth."