Europe must prevent contagion, says David Cameron

David Cameron has called for tough action to prevent Greek debt
turmoil spreading as City analysts warned that today's £110 billion
bailout does not spell the end of the "crisis marathon".

The Prime Minister said Europe must focus on creating a firewall capable of preventing contagion within the eurozone after a second massive rescue package for the debt-laden country was finally delivered.

European ministers cautiously welcomed the deal but it has been dismissed by some experts as undeliverable.

At a press conference in Downing Street Mr Cameron said: "Greece has made its choice and we now have to focus on the next step, which is constructing a firewall which is large enough to prevent contagion within the eurozone."

Eurozone governments approved the the rescue package for the ailing nation following more than 12 hours of talks in Brussels.

But the deal is based on long-range forecasts of Greek's best-case scenario for slashing its debts over the next eight years and forthcoming elections in the country will make it politically difficult to keep on track.

Chancellor George Osborne insisted the bailout was good for Britain and would "hopefully" allow Europe to "move on".

He said: "Of course, resolving the Greek situation is only part of resolving the eurozone crisis, but I think we took a really significant step towards that last night and that is good for Britain, because resolving the eurozone crisis would be the biggest boost that Britain could get for its economy this year."

The Chancellor described the package as the "crucial missing ingredient" in securing a sustainable debt position for Greece.

"The other significant point about last night's deal was that the rest of the eurozone signalled a willingness to stand behind their currency and stand behind Greece and frankly, all along, the failure to deal with the Greek situation has caused uncertainty," he added.

City analysts were less enthusiastic about the long-term prospects of the bailout.

Carsten Brzeski, analyst at ING Bank, said: "It looks like a deal, it walks like a deal, it is almost a deal. Last night's eurogroup meeting has paved the way for a second Greek bailout but the crisis marathon is not over."

Michael Hewson, senior market analyst at trader CMC Markets, said the "can has just been kicked a little further".

He added: "Churchill said, 'Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning'. Greece has still got some way to go."

In return for the latest 130 billion euro (£110 billion) bailout and a private creditor debt write-off worth about another 100 billion euro (£84 billion), the Greek government has pledged to implement fully a severe austerity package of pay, pension and jobs cuts, as well as finding savings of 325 million euro (£270 million) in this year's national budget.

It follows the 110 billion euro (£91 billion) bailout from the EU and IMF in 2010, which failed to lift the nation out of crisis.

Asked whether the UK would be liable for a share of the new package through its contributions to the IMF, Mr Cameron's official spokesman said: "We have not agreed to anything.

"This was a eurozone agreement and there is no proposal on the table for additional IMF support."

European Commission president Jose Manuel Barroso said the bailout "closes the door on the scenario of an uncontrolled default".

He added: "There is no alternative to fiscal consolidation and to structural reform in Greece if Greece wants to regain competitiveness so that it can once again generate growth and jobs.

"I think this message has to be clear and the best way of showing our solidarity with Greece is to speak the truth."

At bilateral talks Mr Cameron and Spanish counterpart Mariano Rajoy united to push for action on growth in the European Union.

Both leaders were among the signatories on a letter from 12 members states calling for "bold decisions" at next week's summit to rebuild confidence among citizens and businesses.

The PM said a "very strong collection" of countries was backing the letter but indicated he was keen for eurozone powerhouses France and Germany to throw their weight behind the plans.

"It's obviously completely open to the French and the Germans to support this letter," he said.

"Obviously the more people that support it, the more we will be able to drive that agenda through at the European Council."

PA