Eurozone crisis: David Cameron calls for action

Prime Minister David Cameron today called on the institutions of the eurozone, such as the European Central Bank, to use "everything they have got" to defend the single currency and resolve the current crisis.

Speaking after talks with French president Nicolas Sarkozy in Paris, Mr Cameron said that a "big bazooka approach" was needed to convince the markets that the eurozone institutions have the firepower to put a halt to speculation over the future of their currency.

The Prime Minister also called for "fundamental" reform to address the lack of competitiveness of some EU economies.

He denied that the UK was being sidelined, amid reports that France and Germany are set to agree a joint drive for limited treaty change when Mr Sarkozy meets Chancellor Angela Merkel on Monday, ahead of a crunch summit of EU leaders next week.

Asked if Britain has some influence on the outcome of next week's talks, Mr Cameron said: "Yes it does. We are one of Europe's major economies, we are a big player in the single market.

"We want growth on the European continent to help the British economy. We want to drive change in the single market to get that and we want to help resolve the crisis in the eurozone.

"In the end, what that is about is convincing the markets that the institutions of the euro will defend and protect and promote that currency with everything they have got - the so-called big bazooka approach that I have spoken about.

"But it also means fundamentally grappling with the lack of competitiveness of some European economies and getting to grips with that agenda to make sure that the eurozone can function properly."

Mr Cameron said the reforms to the eurozone to be discussed at the European Council meeting in Brussels on Thursday and Friday of next week would not necessarily require changes to the treaties governing the EU.

But he added: "I am very clear that if there is treaty change then I will make sure we further protect and enhance Britain's interests.

"We will see what happens next Friday, but the bottom line for me is always what is in the interest of the UK and how can I promote and defend that."

In a speech to the German Parliament in Berlin this morning, Mrs Merkel said she wanted treaty reform - or entirely new treaties - to deliver "concrete steps towards a fiscal union" between eurozone states.

"We need budget discipline and an effective crisis management mechanism," she said. "So we need to change the treaties or create new treaties."

Her comments - which sparked a rally in financial markets across Europe - appeared to suggest that she envisages an EU-wide treaty change, which would require the approval of all 27 members including Britain, rather than more limited tinkering with the rules of the eurozone involving only the 17 users of the single currency.

European Council President Herman van Rompuy will present a paper setting out options for the way forward at next week's summit, and Downing Street was insistent today that it was not yet clear whether the route eventually chosen would feature treaty change.

Mrs Merkel told the Berlin parliament that there was no quick-fix solution to the sovereign debt crisis which has driven the euro into its worst crisis.

"We have started a new phase in European integration," she said.

"The German government has made it clear that the European crisis will not be solved in one fell swoop. It's a process, and this process will take years."

Her comments followed a speech last night from Mr Sarkozy, in which the French President said that he and his German counterpart were drawing up proposals to lift Europe out of its debt crisis and "guarantee" its future.

"France will push with Germany for a new European treaty refounding and rethinking the organisation of Europe," Mr Sarkozy said, looking ahead to next week's summit.

Germany wants tougher disciplinary rules to replace the Stability and Growth Pact, which was supposed to stop eurozone nations running up excessive debts but has been breached dozens of times without effective sanction.

Berlin is pushing for new powers for eurozone supervision of national budgets, allowing countries to be sent to the European Court of Justice if they violate their commitment to keep deficits below 3% of national income and government debt under 60% of GDP.

Today's meeting in Paris was initially billed as an Anglo-French summit, featuring a number of ministers from each side and covering the full range of bilateral issues.

But it was downgraded earlier this week to an hour of talks between Mr Cameron and Mr Sarkozy over lunch, as the escalating problems of the single currency consumed all attention.

This morning, Chancellor George Osborne called on the 17 eurozone nations to "stand behind their currency" and find a solution to the sovereign debt crisis to allow "economic recovery across the continent".

Speaking during a visit to the Humber Bridge to mark a reduction in tolls, he said: "We need the eurozone to resolve their crisis. We need the countries of the euro to stand behind their currency.

"We do need the countries of the euro to work more closely together to sort out their problems.

"Britain doesn't want to be a part of that integration - we've got our own national interests - but it is in our economic interest that they do sort themselves out. The biggest boost that could happen to the British economy this autumn would be a resolution of the euro crisis."

UK Independence Party leader Nigel Farage described Mr Cameron's visit to Paris as "part of a softening-up process by European leaders on Britain".

Mr Farage said: "We know what Sarkozy and Merkel want - a solid fiscal debt and political union. To get this, they require a treaty change.

"Cameron, however, wants to help them but does not want a UK referendum on Europe. This meeting is about trying to square that circle."

Mr Farage said the Prime Minister should use the "once-in-a-lifetime opportunity" of the euro crisis to "act in British interests" by renegotiating UK relations with the EU.

"That he refuses suggests that he prefers the polite applause of Paris, Berlin and Brussels to the wishes of the British people," he added.

Deputy Prime Minister Nick Clegg said he did not believe the eurozone would collapse.

Speaking after talks in Madrid with Prime Minister-elect Mariano Rajoy, Mr Clegg told the BBC: "The commitment to keep the euro is incredibly strong, whether you speak to the German, French or Spanish government.

"For anyone to casually advocate the falling apart of a single currency really needs to think through what the consequences of that would be.

"It would lead to years and years of instability, both economic and political instability, on the European continent.

"Even though we're not part of the eurozone that would be immensely damaging and would have immediate knock-on effects to Britain as well - it would lead to high unemployment, high interest rates, and slow down our economy."

Mr Clegg said closer fiscal integration of the eurozone was "inevitable", but insisted that did not mean Britain would have "subservient status" in the EU.

"In order to create strong underpinnings to the monetary union there is going to be greater fiscal integration, greater sharing of sovereignty, greater sharing of powers about how budgets and tax and spend plans are elaborated within the eurozone; clearly that means that something's going on in the eurozone that we won't be part of," he said.

"To that extent, that's a welcome development because if you want a stable eurozone that has to happen."

In the wake of this week's dire economic forecasts for the UK, Mr Clegg said people had to realise they were not as wealthy as previously thought.

"What the Office of Budget Responsibility said to the country - and the Government - this week, was that we're just a bit poorer as a nation," he said.

"It's going to take us a lot longer to recover fully. I think that that, in many different ways, is the same lesson for many other European countries as well.

"It's made worse, of course, in other parts of the EU where there is also a crisis in the eurozone, which we're not a member of.

"But there (in the eurozone) there are very profound issues which I hope will be resolved quickly, not only because it's good for countries like Spain, who are in the eurozone, but it's very very important to Britain as well."

PA