Cameron warns that break-up of eurozone would be bad for UK
The Prime minister, David Cameron has warned that the break-up of the eurozone would have serious implications for Britain.
He said that 40 per cent of UK exports went to the eurozone and therefore, the UK could not shield itself from the fall-out in the eurozone were it to break up.
He said that the debt crisis in the eurozone was a threat not only to itself but to the UK economy and the wider global economy.
In his speech at the Conservative party conference in Manchester later today, the Chancellor, George Osborne will warn of the threats facing the UK economy, principally the effects of the euro debt crisis.
Behind the scenes the Treasury has said that the uncertainty surrounding the euro is already affecting the recovery and business confidence.
Even though the UK is outside of the eurozone, the high level of export dependency on European markets and the exposure that UK banks have to European sovereign debt means that the UK would be heavily affected by further damage to the single currency.
If the eurozone were to break up a combination of weaker exports, bank losses on assets and the loss of confidence in the markets and amongst consumers could cause the money markets to freeze, hindering lending to UK businesses and consumers and cause a credit squeeze. A further side-effect for the UK is that sterling’s competitiveness could be eroded by a failure of the euro.
Mr Cameron said that the UK government is working closely with European leaders and the International Monetary Fund (IMF).
He called for clear and decisive action from European leaders, saying that they need to strengthen the eurozone’s financial safety mechanisms and push for austerity measures to be kept to by indebted eurozone nations such as Greece.
Greece is still waiting for confirmation that it will receive the next tranche of €8 billion of its bail-out fund. It needs it by the middle of this month to be able to pay its civil servants. The money was delayed last month over fears that Greece was not hitting its austerity targets.
If Greece does default again on its debt repayments it would affect banks throughout Europe who own Greek government bonds.
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