George Osborne 'optimistic' over eurozone crisis


Chancellor George Osborne today said he is "optimistic" a solution will be found to the latest crisis in the eurozone, as David Cameron arrived in Berlin for talks on the single currency with Germany's Angela Merkel.

Mr Osborne said that the eurozone was working hard to come up with an "imminent solution" to stabilise Spain's beleaguered banks, but stressed that any move towards closer financial union will not involve the UK.

Mr Cameron will today tell Ms Merkel that "speed is of the essence" in restoring stability and market confidence in the 17-nation eurozone.

He is expected to tell the German chancellor that he and US president Barack Obama agreed in a phone conversation on Tuesday on the need for an "immediate plan to tackle the crisis and to restore market confidence, as well as a longer-term strategy to secure a strong single currency".

Mr Cameron flew into Berlin from Oslo with Norwegian prime minister Jens Stoltenberg. The three premiers were having a working lunch before answering questions from students at a "town hall event". Mr Cameron and Ms Merkel were then going into bilateral talks.

Before leaving Oslo, Mr Cameron said that he and Mr Stoltenberg were able to play a role in resolving the euro crisis, despite their countries not being members of the single currency.

"I think all countries across Europe can help by offering the right advice and the steps forward to the eurozone countries," said Mr Cameron.

"The first priority is to stabilise the financial situation. That means recapitalising banks, building firewalls and reassuring markets.

"But then, as Norway has done and Britain is doing, we need structural reforms to increase the long-term growth rates of our countries. That is absolutely vital.

"But we also, as Norway has done and Britain is doing, need proper and credible plans for deficit reduction to show the world we can pay our way in the world."

However, Mr Cameron will be wary of being seen to lecture euro members from a position outside the single currency.

He last night cautioned against holding Germany solely responsible for delays in dealing with the long-running debt crisis.

"I don't think it's right to try to lay all the responsibility on one person. It is everyone in the eurozone and throughout the EU," said the PM.

With the re-run Greek election on June 17 followed by crucial summits of the G20 in Mexico and the European Council in Brussels, pressure is on for concrete action by the end of this month.

Ms Merkel is coming under growing pressure to put German taxpayers' money behind measures such as "eurobonds" which would spread the burden of debt from ailing economies like Greece among all single currency members.

Mr Cameron threw his weight behind the eurobond proposal in a key speech in Manchester last month, but Ms Merkel said at the weekend that any such move would have to be accompanied with closer fiscal union between eurozone states.

Mr Osborne today said that moves towards fiscal union were an inevitable part of the permanent changes needed to make the euro work, even after the current credit crisis in Spain is overcome.

Speaking a day after Spain's economy minister was forced to deny his country was seeking a bailout for its banks, Mr Osborne told BBC Radio 4's Today: "I am optimistic that people are working hard on a solution and a solution, I think, is coming. They have identified the problem. I know they are working very hard on an imminent solution."

But the Chancellor cautioned: "I think one of the mistakes we have made over the last couple of years as a world is to assume that if you just get through the latest eurozone problem, the crisis is solved. It is not.

"Just bringing some stability to the Spanish banking system is not going to end the instability in the euro. There need to be more permanent changes to make this currency work."

Mr Osborne said that the "remorseless logic" of monetary union also required "something more akin to a banking union or a financial union" in the eurozone, providing common funds to recapitalise banks and tougher currency-wide supervision.

However he stressed that if that were to happen, Britain would require safeguards to ensure the UK financial sector was protected.

Today's talks in Berlin are not expected to deliver a breakthrough, but are being seen as paving the way for progress once the Greek elections are out of the way.

But speaking in Oslo last night, Mr Cameron said: "Speed is of the essence. Every day that the European economies are stagnant are days when opportunities are lost, wealth is lost, jobs can be lost.

"Clearly the eurozone crisis is the biggest threat to the world economy today. It is the biggest challenge that we all face. It is the thing we have to fix, to sort out, to help restore growth right across the world economy."