Cameron urges eurozone to grab chance for stability

PRIME Minister David Cameron has urged European leaders to take responsibility for restoring market confidence in the single currency.

Talks will reconvene on Wednesday after yesterday’s summit concluded with the prospect of an amendment to the EU treaty to deliver the kind of economic changes necessary to steady the ailing eurozone.

Following six hours of talks in Brussels, Mr Cameron said progress was being made, with proposals on possible treaty changes set to be put forward in December.

European Union leaders also piled pressure on Italy to speed up economic reforms to avoid a Greece-style meltdown.

It is hoped a deal will be reached on Wednesday which would reduce Greece’s debt burden while strengthening European banks and improving eurozone economic governance.

There are also plans to boost the €440 billion (£382bn) bail-out fund so that there is enough money to support Italy and Spain.

Before the 27 EU leaders began work on a comprehensive plan to stem the crisis, German chancellor Angela Merkel and French president Nicolas Sarkozy held a 30-minute private meeting with Italian prime minister Silvio Berlusconi.

France and Germany want to put pressure on Rome to implement labour market reforms and cut red tape for business to raise Italy’s growth potential and reassure investors worried by the country’s huge debt ratio, which is second only to Greece’s.

Ms Merkel warned in a speech on Saturday that if Italy’s debt remained at 120 per cent of gross domestic product, “then it won’t matter how high the protective wall is, because it won’t help win back the markets’ confidence”.

Arriving for yesterday’s sessions of the full EU and the 17-nation eurozone, the leader of Europe’s most powerful economy played down expectations of a breakthrough, telling reporters decisions would only be taken on Wednesday.

Before then, Ms Merkel must secure parliamentary support from her own fractious centre-right coalition in Berlin for increasingly unpopular steps.

European Council president Herman Van Rompuy, chairing the summit, gave a sombre picture of the economic challenges facing Europe, citing “slowing growth, rising unemployment, pressure on the banks and risks on the sovereign bonds”.

He said: “Our meetings of today and Wednesday are important steps, perhaps the most important ones in the series to overcome the financial crisis, even if further steps will be needed.”

Mr Sarkozy, who disagreed sharply with his German counterpart over strategy last week, said he hoped for a breakthrough on Wednesday.

The key outstanding issues are how to make Greece’s debt burden – forecast to reach 160 per cent of GDP this year – manage-able, and how to bolster the eurozone rescue fund to shield Italy and Spain, the euro area’s third- and fourth-largest economies, from bond market turmoil that forced Greece, Ireland and Portugal into EU and International Monetary Fund bail-outs.

Mr Cameron said: “The eurozone countries must come together, and take responsibility and produce a comprehensive and credible package which puts the success of the eurozone beyond doubt.”

He acknowledged that this could mean closer fiscal and economic integration between the 17 single currency nations – but not at the expense of the UK national interest.

He said the crisis was having a “chilling effect” on all 27 EU economies, adding: “While the UK is not in the eurozone and has no intention of joining, it is in Britain’s interest to have a strong and healthy euro.”

If there were a treaty change, the Prime Minister continued, it would need unanimous agreement of the 27 leaders before going ahead, and would take years to implement, so “let’s not get ahead of ourselves”.

He said there was a danger that as the eurozone countries worked together, there may be temptations to leave other European countries out of issues of mutual interest, involving key issues such as completing the financial services accords in the single market.

He added: “I think this crisis means that greater fiscal and economic integration is inevitable [in the eurozone] but that must not be at the expense of the UK national interest.”

Mr Sarkozy, according to EU officials, said he was sick of reading in the newspapers about advice Mr Cameron and his chancellor were offering the eurozone.

He said George Osborne had been present for an agreement on strengthening banks – an issue which affects all 27 countries, although Britain will not need to take action.

Now, on the two remaining issues involving only the eurozone, he argued that Britain and the rest should stay away.