Britain urges world's central banks to act

LONDON Mon Jun 18, 2012 9:29am EDT

British Prime Minister David Cameron gives a statement to the media before bilateral talks with German Chancellor Angela Merkel in Berlin, June 7, 2012. REUTERS/Tobias Schwarz

British Prime Minister David Cameron gives a statement to the media before bilateral talks with German Chancellor Angela Merkel in Berlin, June 7, 2012.

Credit: Reuters/Tobias Schwarz

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LONDON (Reuters) - British Prime Minister David Cameron will urge central banks on Monday to act to protect the global economy from the ravages of the euro zone debt crisis, and demand that the currency bloc's biggest economic players work harder to resolve its problems.

Cameron, due to speak to world business leaders at the G20 summit of developed and emerging economies in Mexico, will warn the euro zone that it faces "perpetual stagnation" unless it fixes its problems.

"We cannot afford for central banks around the world to stand on the sidelines if we are to deliver the growth we need," Cameron will say, according to extracts from his speech.

"It is becoming increasingly clear in the euro zone that the core, including the ECB (European Central Bank), must do more to support demand and share the burden of adjustment," he will say, in a strong hint to Germany - the bloc's largest economy and strict paymaster - and the euro zone's monetary policymakers.

Britain, the largest European economy outside the euro, has repeatedly blamed its own economic woes on the euro zone crisis. Some European leaders say such lecturing only makes matters worse.

Cameron, attending the G20 summit with his finance minister George Osborne and a large business delegation, will put further pressure on Europe at the start of a summit that is likely to be dominated by the continent's banking and sovereign debt crisis.

"The alternatives to action that creates a more coherent euro zone are either a perpetual stagnation from a euro zone crisis that is never resolved - or a break up ... that would have financial consequences that would badly damage the world economy," he will say.

Just last week, Britain's central bank and government announced a plan to flood the country's financial system with billions of pounds to try to get a recession-hit economy moving.

Critics at home argue Cameron's seven-year austerity plan aimed at eliminating a record budget deficit is the real cause of Britain's shrinking economy, rather than the euro zone.

"This government made a reckless decision two years ago — raising taxes and cutting spending too far and too fast — which has left Britain in a much weaker position as the global hurricane builds around us," said Ed Balls, finance spokesman for the Labour opposition, writing in London's Evening Standard.

After a narrow election victory for Greece's pro-bailout parties, Germany signaled on Monday it might grant Athens more time to meet its austerity targets to avert what could be a catastrophic euro exit.

(Reporting by Matt Falloon; Editing by Ruth Pitchford)

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