Spain bailout will take place at 'no cost' to UK taxpayer, says Downing Street
Monday 11 June 2012
The 100 billion euro bailout of Spain's banks will take place at "no cost" to the UK taxpayer, Downing Street insisted today.
An initial surge in markets across Europe in response to the bailout faded amid uncertainty about how the deal will be funded and whether Spain will be able to cope with the resulting increase in its debts.
Meanwhile, pressure for a referendum on UK membership of the European Union mounted, with the publication of an opinion poll suggesting that almost half of voters (49%) want one immediately, while a further third (33%) believe it should take place within the next few years.
The survey by Populus for The Times found 32% wanted the UK to be part of a single market in a wider European community, as against 40% who did not, while 27% said they did not know.
Leading Eurosceptic think-tank Open Europe warned that failure quickly to rewrite the terms of British membership of the EU would result in unstoppable public support for a damaging exit, with "unpredictable political and economic risks".
"In order to justify continuing commitment to the EU and avoid being driven by the electorate inexorably towards the exit door, Britain needs to carve out a new model of EU co-operation," it recommended in a report.
"In this structure, the UK should remain a full member of the single market in goods and services and of the EU's customs union, but take a 'pick-and-mix' approach in other areas of EU policy."
Being inside the EU remained "the most beneficial arrangement for Britain", it said.
Number 10 welcomed the Spanish bailout, which injects support into banks in the EU's fourth-largest economy which had been left at risk by massive borrowing to fund speculative construction projects during the boom years before the financial crash.
"The terms are still being sorted out, but certainly there is going to be no cost to the UK taxpayer, as the Chancellor has set out," said a Downing Street spokeswoman.
"The important thing is that the eurozone is helping members of the eurozone, which is an important principle."
Where decisions affect all 27 members of the EU - such as those dealing with the operation of the single market - David Cameron and Chancellor George Osborne will insist that they are taken with the agreement of all 27, said the spokeswoman.
"As the Chancellor set out this weekend, whatever happens in the eurozone has an effect on the British economy. It is really important that we see a resolution to these issues, which is why this weekend's announcement regarding the Spanish banks is welcome," she added.
The spokeswoman said the Prime Minister backs Mr Osborne's assessment that problems in the eurozone are holding back Britain's economic recovery.
The Chancellor has faced criticism from some Conservative MPs over his claim yesterday that UK recovery was being "killed off by the crisis on our doorstep".
David Ruffley, a member of the Commons Treasury Committee, said that "eurozone meltdown" should not be used "as an alibi for no growth in the UK", while Douglas Carswell wrote on his blog: "It is not the eurozone crisis that we should blame for our awful economic performance, but the almost total absence of domestic economic reform."
Asked whether Mr Cameron shared the concerns voiced by critics of the Chancellor, a Downing Street spokeswoman told reporters: "He would agree with the Chancellor, which is why it is so important that we see a resolution of the problems in the eurozone."
City brokers Tullett Prebon said it was a "gross over-simplification" to blame Greece and Spain for their own difficulties, arguing instead that they are the "victims" of fatal flaws in the design of the euro.
Global head of research Tim Morgan said: "In addition to the obvious inability of a troubled economy to devalue, the half-baked euro structure has distorted competitiveness and has not delivered the automatic stabilisers which operate within a 'normal' single currency area such as sterling or the dollar.
"Where monetary policy is concerned, one size simply does not fit all, and the euro not only allows but actually encourages fiscal irresponsibility."
While euro membership has harmed the prospects of countries like Greece and Spain, it has delivered massive competitive advantages to others like Germany, he said.
And he added: "Those countries which have profited from euro distortions - principally Germany - have a moral obligation, as well as huge self-interest considerations, for helping Greece on less draconian terms."
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