I've minimised UK's exposure to eurozone bailout, says Alistair Darling

Published on Monday 10 May 2010 23:30

CHANCELLOR Alistair Darling insists he has "minimised" Britain's exposure after Europe's finance ministers staked a massive 500 billion (£433bn) on bailing out the single currency.

He said a deal hammered out after ten hours of talks in Brussels meant Britain's exposure would be about 8bn in the event of a "100 per cent default" by an 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," Mr Darling said.

In his last EU gathering representing the current Labour government, Mr Darling and other finance ministers approved a 60bn top-up of an existing EU budget fund for helping struggling economies.

The remaining 440bn will be provided via a new European Stabilisation Fund if and when required to prop up flagging economies such as Spain and Portugal. Mr Darling said: "There is about 440bn 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 per cent 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 8bn."

Mr Darling said most nations were members of the IMF, which lends money to countries in difficulties, thereby acting as a kind of "big insurance scheme".

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

for all of us in Europe but also for the wider world. It is an example of how international communities can work together".

Mr Darling confirmed he had spoken to shadow chancellor George Osborne and Liberal Democrat 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".

Mr Darling refused to disclose the details of his discussions with Mr Osborne and Mr Cable.

Yesterday's Brussels deal, coupled with the aid package for Greece, was aimed at convincing speculators that the euro crisis had been contained and would not spread to other struggling eurozone countries.

But Mats Persson, director of Open Europe, which campaigns for EU reforms, said: "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."