Cameron shifts his focus from austerity to growth

By Andrew Grice

David Cameron appeared to shift his economic focus from austerity to growth yesterday, as it emerged that eurozone nations have been advised to draw up emergency plans to handle Greece's possible exit from the euro.

The Prime Minister joined other EU leaders in exerting pressure on Angela Merkel, the German Chancellor, to do more to solve the crisis – including pooling eurozone debts through eurobonds and a more interventionist approach by the European Central Bank.

At home, Mr Cameron is also changing his tone by joining forces with Nick Clegg to press the Treasury to secure growth through infrastructure and housing projects and ensuring more lending to business. Yesterday Mr Clegg promised a "massive" increase in government-backed investment in the next few months.

Both he and Mr Cameron insist they are not advocating a "Plan B" and are sticking to their deficit-reduction plans. However, some Liberal Democrats see the change of emphasis as a "Plan A plus".

Ed Miliband, the Labour leader, mocked Mr Cameron's change of tack. He told the Prime Minister in the Commons: "For two years you have been the high priest of austerity, you have been telling the world that austerity alone is the answer. But now the recognition has dawned that it isn't working and you find yourself on the wrong side of the argument."

Stock markets around Europe tumbled after Germany's Bundesbank, the central bank, said Greece's departure would pose "considerable but manageable" challenges. M Hollande, at his first summit, clashed with Angela Merkel, the German Chancellor, over his call for eurobonds, which would lower borrowing costs for debt-ridden nations. But Mrs Merkel insisted: "The [EU] treaties forbid taking on a mutual liability, that includes in our opinion also eurobonds."

EU and Greek leaders insisted there was no "master plan" for Greece to pull out of the euro. But officials said the Eurogroup Working Group, experts who advise the 17-nation bloc "agreed that each eurozone country should prepare a contingency plan, individually, for the potential consequences of a Greek exit from the euro".