Darling says UK exposure 'minimised' in euro bailout

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Chancellor Alistair Darling insisted today that he had "minimised" Britain's exposure as Europe's finance ministers staked a massive 500 billion euro (£433 billion) on bailing out the euro.

Mr Darling said a deal hammered out after 10 hours of talks in Brussels would mean Britain's exposure would be about £8 billion in the event of a "100% default" by a EU country.

"It is a good deal for Europe and we have minimised our exposure and that is a very, very important feature of what I managed to agree last night," he told BBC Breakfast.

The Chancellor's remarks come as European finance ministers agreed a deal in a bid to restore the euro's stability and credibility in the world markets.

In probably his last EU gathering representing the current Labour administration, Mr Darling approved a 60 billion euro (£52 billion) top-up of an existing EU budget fund for helping struggling economies.

The remaining 440 billion euro (£381 billion) will be provided via a new European Stabilisation Fund if and when required to prop up flagging economies such as Spain and Portugal.

Speaking on BBC Breakfast, Mr Darling said: "There is about 440 billion euros which the eurozone countries have put together. That is their responsibility - we are not involved in that.

"The second element is that there is additional help from an existing facility going to be made available to any member state that gets into difficulties, If there was a 100% default - and remember all these loans are made with strict IMF (International Monetary Fund) conditions and strict European Union conditions - then our exposure would be about £8 billion."

Mr Darling said most countries in the world are members of the IMF which lends money to countries in difficulties, thereby acting as a kind of "big insurance scheme" with very stringent conditions attached to loans.

He said: "The good thing about it is that it comes with very stringent conditions so countries generally don't default.

"Therefore this is actually quite a good insurance scheme for us. Put another way - if we didn't do it, the risk is the countries would go down and there would be a far greater loss on us."

Mr Darling described the agreement as a "very good deal" with the UK's maximum exposure limited to £8 billion.

He told the BBC Radio 4 Today programme: "Overall it is a very good deal for all of us in Europe but also for the wider world. It is an example of how international communities can work together."

The Chancellor went on: "Our exposure for the additional amount of money could be £8 billion... that would only arise if there was a 100% default and that simply hasn't happened."

Mr Darling confirmed he had spoken to Shadow Chancellor George Osborne and Lib Dem Treasury spokesman Vince Cable about the deal but insisted: "I made the deal and I accept full responsibility for it."

All three had agreed "there was no way Britain was going to underwrite the euro".

He said: "I am not going to disclose the conversations we had, because we had them on the basis that they were private and confidential."

A statement issued after the talks confirmed that the new fund placed the potential risk squarely with the eurozone.

However the top-up of the existing EU budget emergency fund could expose the UK to extra payments into the EU budget if a member state being bailed out with loans using the fund as collateral defaulted.

The whole deal, coupled with the aid package specifically for Greece, was calculated to convince speculators that the euro crisis was contained and that it will not spread to other struggling single currency countries such as Spain and Portugal.

But Mats Persson, director of Open Europe, campaigning for radical EU reforms, warned: "While it is in everyone's interest for Europe's economy to stabilise, this deal could easily spiral out of control and see UK and European taxpayers becoming exposed to ever growing debt burdens of governments over which they have no democratic control whatsoever.

"This is simply unsustainable - both from a democratic and an economic point of view. And what we were told would never happen, has now occurred - British taxpayers have become directly liable for the mess created by the euro experiment."

He added: "It's time to consider whether the cost of keeping the eurozone intact, both for Europe as a whole and individual countries, is actually higher in the medium and long term than allowing for one or more countries to exit the single currency, and undergo restructuring and devaluation."