UK taxpayers’ multi-billion bill for new euro ‘firewall’

But their efforts were paralysed by uncertainty over Greece’s political convulsions and doubts over whether Italy will enact economic reforms designed to save it from financial disaster.

Greek prime minister George Pap-andreou yesterday appeared to have dumped plans for a referendum on whether to accept a European bail-out agreed last week.

Ahead of a confidence vote in his parliament today, Mr Papandreou said if political consensus could be reached over the terms of the bail-out there would be no need for a referendum.

Meanwhile, amid continued concern that the eurozone could break up, a UK minister told the House of Commons the Treasury had drawn up contingency plans for the collapse of the euro.

On a humiliating day for the debt-burdened continent, the summit saw fresh support from Britain, the US and China to beef up the International Monetary Fund to ensure any country which collapses gets the back-up it will require.

While the IMF cash would not be earmarked solely for European nat-ions facing default, the rush to provide fresh reassurance to markets came amid fears that the turmoil in Greece was on the verge of hitting Italy and Spain, both facing massive debts.

British officials said the safety net was required now before a country falls over the precipice and cannot pay its debts.

Meanwhile, US president Barack Obama is understood to have warned fellow leaders in private talks yesterday afternoon that “we could find ourselves in an unmanageable situation” if the Greek debt panic spreads to other larger nations.

That crisis dominated the summit yesterday, with leaders believed to have broken off from talks to check their BlackBerrys to keep up to date with events in Greece

Mr Papandreou said his call this week for a referendum, which sparked panic on global financial markets, “was never a purpose in itself”, and said he would be happy if the vote were not held.

He told politicians from his Socialist party he had agreed to talks with the centre-right opposition on a transitional government to implement a new EU/IMF bail-out programme.

If that led to a consensus in support of the plan, there would be no need for a referendum, he said.

The proposal of a referendum had sent markets into turmoil, and enraged fellow European leaders, who had warned Greece that the move could see the country dropping out of the euro – the first time such admission has been made.

Treasury minister Mark Hoban raised eyebrows in the Commons yesterdaywhen asked to confirm that the government had no plans to take Britain into the European single currency.

Mr Hoban told MPs: “I don’t think there is any intention for us to join the euro at the time when it is breaking up.”

He also confirmed that the Treasury had contingency plans in place to deal with the potential collapse of the euro.

Asked by Tory back-bencher Peter Bone what plans had been made “for when the euro collapses”, Mr Hoban said: “You would expect that every good government would have plans in place for a whole range of eventualities, and this government is well prepared for any eventuality.”

British officials said that agreement on the exact sum of the extra injection into the IMF had not been agreed, but any genuine firewall is certain to have to be more than a £1 trillion.

It would see Britain increasing its own exposure to IMF loans well above the £30 billion it currently has pledged. The commitment is likely to spread concern that while Britain has managed to stay out of the eurozone bail-out, it may now find itself paying out through a separate IMF package as well.

But Prime Minister David Cameron sought to dampen fears that the UK could see itself dragged into a eurozone collapse, insisting that creditors to the IMF had always been repaid.

Chancellor George Osborne said that none of the member states represented in talks yesterday had backed away from increasing IMF cash.

He also said that the Chinese government had been “interested in providing support” – in contrast to their reluctance to back the eurozone’s separate bail-out deal.

The hope among G20 leaders is that, together with last week’s £1 trillion eurozone package, a separate IMF guarantee to stand behind any defaulting nations would ease market fears of a chaotic default.

Currently, Ireland, Portugal and Greece have all taken money from the IMF, in return for which they have accepted austerity measures and tax rises in a bid to cut their massive financial deficits.

But officials were making it clear last night that the IMF deal would have to go hand in hand with the eurozone’s own proposals, which have still to be fleshed out.

Mr Osborne said: “The question is are they willing to implement the decisions and the message we are getting here is that they are.”

Mr Cameron added: “When the world is in crisis, it is right that you consider boosting the IMF. What we wouldn’t support is the IMF investing directly in some euro bail-out fund.

“That wouldn’t be right and we won’t back it, so there is no risk to British taxpayers of seeing the IMF play its proper role; that’s what we have always supported.”

Concerns that the IMF does not have deep enough pockets were first aired at a summit of finance ministers in Washington last month.

The IMF currently has £750bn ready to lend, of which £350bn is already committed – leaving £400bn to supply to nations which require a bail-out.

However, Italy alone needs to refinance around €300bn of debt next year, and has been facing prohibitive interest on its bonds over recent weeks, prompted by the Greek crisis.

The day marked a difficult trial for French president Nicolas Sarkozy who has been forced to watch his own preparations for the summit torn up by the continuing Greek turmoil.

But, last night, with Greece backing away from a referendum on the euro, he issued a strong call for the eurozone to stick together, insisting that “we cannot allow the euro to break up”.

He added: “That would be the break-up of Europe. The euro explodes, so does Europe.”