At the summit in Brussels, Mr Cameron made clear his frustration and impatience about the lack of progress after 18 summits in the past two years devoted to the euro debt crisis Photo: AP
Markets tumbled again on Wednesday in reaction to fears that Greece’s exit was being prepared.
David Cameron was in Brussels pleading with EU leaders to deal decisively with the Greek debt crisis to prevent a “disorderly” collapse of the euro.
The Prime Minister warned other member states that there was a risk of the “contagion” spreading from a Greek exit, which would have dire consequences for Britain.
Markets in Italy and Spain closed down 3.7 per cent and 3.3 per cent respectively. The FTSE 100 closed down 2.5 per cent, or 136 points, at 5,226 points, wiping billions of pounds off the value of major companies.
Traders were unsettled after the German central bank admitted for the first time that it might be better if Greece were allowed to exit. Lucas Papademos, the former Greek prime minister, also confirmed that the Athens government was making preparations for leaving the euro.
In a speech in Berlin, Mr Clegg will dismiss talk that “a Greek exit now is in everyone’s best interests” in comments that are sure to anger Tory Right-wingers. In a speech at an engineering company, he will say: “No rational person interested in the wealth and wellbeing of Europe’s citizens could advocate taking such a risk; not with Greece’s future, or our own.” The Deputy Prime Minister will say a “dark cloud still hangs over Europe”, and warn that “the tree is falling, and we are pruning one leaf at a time”.
At the summit in Brussels, Mr Cameron made clear his frustration and impatience about the lack of progress after 18 summits in the past two years devoted to the euro debt crisis.
He demanded the eurozone take measures to prevent a Greek exit destroying the European banking system. He told 26 other heads of state that “we need a plan to manage contagion”.
Arriving at the summit, Mr Cameron said the meeting was “important” for Britain because “what happens in the eurozone affects our country”.
He added: “What we need is a decisive plan for Greece and we need a decisive plan to help get the European economies moving.”
The Coalition fears that a Greek exit could kick-start a collapse in the single currency because the eurozone is not prepared for it.
It is concerned that the current firewall around the eurozone is “not enough” to prevent a full-blown global economic crisis. It fears a run on European banks, beginning in Portugal and rapidly spreading to Spain.
One government source said: “If it comes to euro exit how do you limit it to Greece? People want to know what will be done to back the currency in extremis. What stands behind the euro?”
“The clearest danger to world economy is a Greek exit and a disorderly break-up of the euro with loss of more members.”
Mr Cameron’s hope, expressed last week, that Germany could be willing to fund an issue of Eurobonds to underwrite the finances of the eurozone were dashed by German chancellor Angela Merkel, who said the bonds could break EU law.
The EU leaders’ meeting broke up at around 12.30pm, UK time, after spending just an hour – out of around six hours of talks – discussing the crisis in Greece.
Speaking shortly afterwards, Mr Cameron disclosed that the other eurozone leaders tried again to push the case for a financial transaction tax.
Mr Cameron said it was a “good meeting” and there were some “innovative ideas” about boosting growth in Europe. But he added: “Then there was some bad ideas too. The Financial Transactions Tax is a bad idea – it will put up the cost of people’s insurance, put up the cost of people’s pensions, it will coost many, many jobs.
“It will make Europe less competitive and I will fight it all the way.”