Greek delay is dangerous, David Cameron warns


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Indy Politics

Prime Minister David Cameron today urged successful parties in yesterday's Greek elections to move swiftly to form a government, warning that delay could be "very dangerous".

His comments came as he arrived in Mexico for a G20 summit of the world's leading economies which will be dominated by the crisis in the eurozone and the fallout from yesterday's polls.

Before leaving London late last night, Mr Cameron held a conference call with the leaders of Germany, France, Italy and Spain as well as the presidents of the European Commission and European Council.

It is understood that the leaders were encouraged by the results of the ballot, which saw the centre-right New Democracy party outpoll the far-left Syriza in an outcome which makes Greek departure from the euro less likely.

But there is now a sense of urgency about New Democracy - which is signed up to the austerity programme demanded in a memorandum setting out the terms of Greece's multibillion-euro bailout - forming a coalition government in Athens.

Mr Cameron said: "The outcome of the Greek election looks clear in terms of a commitment to stay in the eurozone and to accept the terms of the memorandum.

"But I think those parties that want that to happen can't afford to delay and position themselves.

"If you are a Greek political party and want to stay in the eurozone and accept the consequences that follow you have got to get on with it and help form a government. A delay could be very dangerous."

Mr Cameron is expected to use a speech later today to step up pressure on the 17 eurozone countries - and particularly Germany and the European Central Bank - to take decisive action to address the fundamental problems behind the crisis in the single currency.

Europe's leaders must be ready to take tough political decisions or face the threat of either "perpetual stagnation" or a hugely damaging break-up of the single currency, he will warn.

He has brought a 25-strong business delegation with him to Mexico, in a sign that he wants to build up trade links with emerging economies to make up for continuing weak demand from traditional markets for British exports in Europe.

Speaking to a business audience in the Pacific resort town of Los Cabos, the Prime Minister will put the crisis in the euro area at the top of a list of "five big threats to the global economy".

He will urge fellow G20 leaders to take "bold steps" to restore growth, and will warn against "backsliding" on trade protectionism and reforms to financial regulation.

A failure to follow through on pledges made at previous summits to reform the banks would leave the world exposed to a repeat of the 2008 financial crash, he will warn.

No corner of the world is safe from the five threats of the eurozone instability, sovereign debt, low growth, protectionism and failure to regulate the banks, the PM will say.

"These five threats are very real. And let's be clear - in a global economy, they threaten us all."

Speaking to the B20 business summit in Los Cabos, Mr Cameron is expected to renew his call on the eurozone to take the steps towards closer fiscal and financial integration which he believes are necessary to restore stability.

He will call on "core" members like Germany, as well as the ECB, to "do more to support demand and share the burden of adjustment", warning that central banks cannot afford to "stand on the sidelines" in the current crisis.

"The reality is that there are a set of things that eurozone countries need to do," the PM will say. "And it's up to eurozone countries whether they are prepared to make the sacrifices these entail.

"The challenge is one of political will as much as economics. Of course these things are difficult to do, but just because these things are difficult does not mean we should not say them.

"If the eurozone is to stay together then it has to make at least some of these difficult decisions.

"The alternatives to action that creates a more coherent eurozone are either a perpetual stagnation from a eurozone crisis that is never resolved or a break-up caused by a failure to address underlying economic fundamentals that would have financial consequences that would badly damage the world economy, including Britain."

Mr Cameron will say that the UK has a "clear vision" of the "stable, growing, competitive and dynamic" world economy, powered by trade and financed by strong banks, which it wishes to create.

But he will warn of five threats to this vision: instability and contagion in the eurozone; debt and the "muddle-headed" belief that indebted countries can spend their way out of crisis; the failure to deliver the monetary activism and structural reform needed to deliver sustainable growth; 1930s-style protectionist barriers to trade; and the failure to complete long-term banking reforms.

G20 leaders need to show "courage, resolve and political commitment", he will say, adding: "There can be no room for timidity in meeting these threats, no ducking the essential action on fiscal discipline, monetary activism and structural reform and no backsliding on the hard-won gains of previous summits.

"For the G20 to give in to self-defeating protectionism or to water down the tough new commitments on financial regulation would be unforgivable."

Britain is pushing for G20 states including the US, Russia, Indonesia and South Korea to complete the implementation of the Basel III requirements on bank liquidity and leverage agreed following the 2008 crisis.

Mr Cameron will say: "This is no time for caution or defeatism.

"The road ahead will not be easy. But I believe that we understand the steps needed to revitalise the world economy and that together we can take the bold steps necessary.

"The stakes are high, of course - incredibly high. But with courage and determination we can use these G20 and B20 summits to really begin to get to grips with these five great threats to the global economy.

"That is the task that brings us together in Mexico. To secure our prosperity now and for generations to come."