British public will not prop up ailing European banks, says David Cameron
Thursday 07 June 2012
David Cameron today pledged that he will not ask British taxpayers to underwrite the debts of ailing banks in Greece and Spain.
Mr Cameron was speaking in Berlin ahead of talks about the eurozone crisis with German Chancellor Angela Merkel.
The Prime Minister has put his weight behind proposals for closer fiscal union between the 17 eurozone nations - perhaps by the issue of eurobonds which would allow them to share the burden of debts.
But he today left no doubt that Britain would not be involved in any such arrangement.
Mr Cameron said: "I can understand why eurozone countries may want to look at elements of banking union.
"Because we are not in the single currency, we won't take part in the profound elements of that banking union.
"I wouldn't ask British taxpayers to stand behind the Greek or Spanish deposits.
"It is not our currency, so that would be inappropriate to do.
"I understand why single currency countries have to look at deeper integration. I will make sure that Britain's interests, particularly in the single market and the openness and fairness of the single market are protected. That is key for Britain.
"We want the eurozone to succeed. We want the euro to solve the problems it faces, so that all European economies including ours can get back to healthy growth."
Mr Cameron was speaking ahead of talks with Ms Merkel in which he was expected to press her for speedy action to resolve the long-running eurozone crisis.
With re-run Greek elections on June 17 to be followed by summits of the G20 in Mexico and European Council in Brussels, pressure is building for action.
Mr Cameron and US president Barack Obama agreed earlier this week that an "immediate plan" is needed to restore stability and market confidence in the euro.
Ms Merkel has made clear that she believes the creation of eurobonds would have to come as part of closer banking and fiscal union between single currency states.
But she insisted today that this did not mean the creation of a two-tier Europe, pointing out that Britain and other countries have held back from previous measures of integration while remaining full members of the EU.
"We are not trying to isolate ourselves from those who have not joined in," she said.
Before their talks, Mr Cameron and Ms Merkel answered questions from students at a "town hall" event at the Federal Chancellery in Berlin.
Ms Merkel rejected accusations that Germany had shown a lack of solidarity with Greece, whose financial problems have brought the eurozone to the brink of break-up over the past two years.
Funds poured in through various support schemes amounted to one-and-a-half times Greek GDP, she pointed out.
And she said: "Solidarity is not lacking here. That is not the problem when it comes to Greece."
Ms Merkel said the important issue was not the volume of money provided but the credibility of plans to put Greece's economy back on an even keel - and suggested that this may depend on Greek workers' willingness to pay their taxes.
"If there is no credibility and no belief on the Greek behalf that this will work, then that is a big problem," she said.
And she asked: "Why are there countries where people pay taxes without complaining too much and why are there countries where people quite obviously don't like to do that?"
Apparently realising that she risked sparking a storm like IMF chief Christine Lagarde when she made similar comments recently, the German chancellor hastily added: "I don't mention any specific countries."
Mr Cameron once again voiced his strong opposition to a Europe-wide financial transactions tax, which he said would simply drive jobs and growth away from the continent.
Britain's financial services industry was already "making a proper contribution" to helping get the national deficit under control, through taxes such as the banking levy, said the Prime Minister.
But he recognised that the mistakes made by banks in the run-up to the crash of 2008/09 had fuelled the anger seen in the movement to occupy areas of the City of London with tent cities.
"I think a lot of the anger was with irresponsibility in the banking industry and the financial industry and I think people were right to be angry because banks had made bad decisions and had to be bailed out by the taxpayer, and many of the taxpayers were earning much, much less than the people who made the bad decisions in the banks," said Mr Cameron.
"People were angry about that. But anger is not a policy. We need to work out what do we do, how do we regulate these organisations properly.
"In Britain, we have taxed them with a bank levy and said they have to have a proper separation between retail banks and investment banks and that they have to have strict rules on disclosure of pay.
"We think we have responded properly to the anger.
"There are some things that angry people would like us to do - and some who are not so angry. The financial transactions tax, in my view, would drive a lot of financial services to whatever country did not have them and that would be a bad policy because it would mean fewer jobs and be bad for our economy."
Mr Cameron said: "I have no doubt that the single currency countries will want to seek greater integration. That is clearly going to happen over the coming months and years.
"Britain is not in the single currency, we won't be joining the single currency, so we won't take part in that integration, but we know it is necessary for the single currency to deal with these issues so that it will work properly in the future."
Speaking later, after his talks with Ms Merkel, Mr Cameron characterised the meeting as "good and positive".
He said: "It is not easy when you have got in the eurozone 17 countries, 17 governments and one currency, so I understand the difficulties.
"But obviously, I am pressing the case for action to solve the financial crisis, to recapitalise the banks, build the big firewall, get growth going in Europe through structural reform and make sure there are clear and credible plans to deal with deficits.
"All of these things need to happen and Britain will keep pushing for them."
Mr Cameron was asked whether a move towards closer integration within the eurozone of the kind which Ms Merkel has advocated would trigger a referendum in the UK.
He replied: "The British people have this guarantee - and it is now written into law by this Government - which is that if power is transferred from Westminster to Brussels then we hold a referendum.
"That's the guarantee, that's in law, and it is right it should be there."
On the issue of how Britain could be protected from the development of a two-speed Europe, the Prime Minister said: "The key thing is that we want the best for Britain in Europe. We are in Europe because we want the trade, the investment, the free movement, the ability for our businesses to grow and expand.
"That single market is vital for Britain and it is that that we will always defend."
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