By Matt Falloon
MANCHESTER, England May 17 Prime Minister David
Cameron urged Europe's rulers on Thursday to do more to quell
the euro zone debt crisis and raised the prospect of a Greek
default to argue he must stick to his unpopular attempt to cut
spending and reduce debt at home.
Warning that the survival of the euro was now in question,
Cameron showed growing alarm and frustration that the crisis was
spinning out of control, threatening Britain's $2.5 trillion
economy and his own electoral prospects in 2015.
"Greece is on the brink, the survival of the euro in
question," Cameron told business leaders on a grey and damp
morning in the northern English city of Manchester.
"Faced with this, I have a clear task: to keep Britain safe.
Not to take the easy course - but the right course," he added.
Echoing the words of Bank of England Governor Mervyn King,
Cameron said the crisis in the European Union - Britain's
biggest trading partner - had lasted more than two years but the
"storm" was far from over.
"We are in uncharted territory which carries huge risks for
everybody. As I have consistently said, it is in Britain's
interest for the euro zone to sort out its problems."
He said Europe's problems showed the dangers of scrapping
his government's attempt to cut Britain's vast budget deficit,
though he called on the European Central Bank to stimulate
demand to help peripheral euro members.
"It is becoming increasingly clear that they are less likely
to be able to sustain that necessary adjustment economically or
politically unless the core of the euro zone, including through
the ECB, does more to support demand and share the burden of
adjustment," Cameron said.
He added that the Bank of England could do more to support
the economy if inflation fell below its target, a barbed way of
asking Governor King to help boost demand.
After snubbing Francois Hollande when the Socialist
candidate came to London weeks before the French election, the
Conservative Cameron said he now welcomed the new French
president's idea of launching project bonds to drive demand by
funding big infrastructure deals.
But since Cameron refused to sign up to an EU economic pact
last year that was supposed to help shore up the euro zone, his
comments may have more resonance in eurosceptic Britain and his
own divided party than in the EU's 26 other member states.
For Cameron, the gale winds from Europe threaten to
undermine the central purpose of the coalition government he has
headed since 2010: to nurture Britain back to growth after the
most serious crisis since the Great Depression.
Turmoil in Europe could deepen Britain's recession by
crippling the European banking system and dampening already
"People are holding back from investment decisions because
of that uncertainty - it's the worst enemy for business,
uncertainty is the big killer," said Les Harvey, a business
consultant who specialises in construction and infrastructure
and who attended Cameron's speech.
"It's a concern. It's such a major trading partner -
whatever affects them is going to affect us."
Cameron said the storm showed Britain must continue to cut
the deficit, which in 2009-2010 reached a record 11 percent of
gross domestic product, rather than throwing money into the
economy in an attempt to kick-start growth.
"We must resist dangerous voices calling on us to retreat,"
Cameron said. "If markets don't believe you are serious about
dealing with your debts, your interest rates rocket and your
But even the government's own figures show Britain's public
sector net debt will rise over the next four years, hitting a
record of 1.48 trillion pounds ($2.36 trillion) in 2016, while
the deficit cannot shrink as fast as expected if the economy
continues to contract.
Opponents said the government had failed to stoke growth.
"The fact is we are paying a long-term price for these
failures," the opposition Labour Party's shadow chancellor, Ed
Balls, told parliament.
"National debt higher, living standards down, long-term
youth unemployment becoming entrenched, over 24,000 companies
out of business...investment plans cancelled or diverted
overseas, our economy weaker, capacity lost," Balls said.
That economic minefield makes Cameron's position even more
precarious as he faces an electorate upset at the gloom of
recession and an unruly anti-European Union wing of his
Conservative party that wants Britain to leave the club.