Cameron joins G20 debt crisis talks

Nov 3 2011

Prime Minister David Cameron will fly to France for a crunch meeting of the G20 set to be dominated by the debt crisis in the eurozone.

The summit's host French president Nicolas Sarkozy and German chancellor Angela Merkel held emergency talks on Wednesday night with Greek prime minister George Papandreou to press him for a swift resolution to uncertainty about his country's future in the single currency, following his shock announcement of a referendum on the rescue package drawn up last week.

Mr Sarkozy and Mrs Merkel said afterwards that the next tranche of emergency loans would be withheld from Athens until after the poll - to be held early next month.

While the wording of the referendum question would be down to the Greek government, they indicated, the issue would be one of whether or not to stay in the eurozone.

Mr Sarkozy was hoping to use the G20 gathering in Cannes to persuade the rest of the world that the eurozone had taken the tough decisions needed to resolve its two-year sovereign debt crisis and to urge cash-rich exporter nations such as China to contribute towards a one trillion euro (£870 billion) European stability fund.

But Mr Papandreou's decision to seek endorsement from voters for the rescue deal - which envisages a 50% write-down of Greek debt but will mean years of austerity - has thrown his plans into disarray by panicking markets around the world and plunging Europe back into weeks of uncertainty.

Mr Cameron and Chancellor George Osborne have made clear that Britain will not contribute to the eurozone bailout fund for Greece or any International Monetary Fund (IMF) support targeted at shoring up the single currency.

But the UK is ready to support an increase in overall IMF funding, which could see more British taxpayers' money going into loans to rescue individual European countries facing financial meltdown. At present, the UK provides £29 billion of the IMF's 950 billion US dollar (£600 billion) lending capacity.

Sources rejected suggestions that UK reluctance to offer financial support for the eurozone bailout left the Prime Minister a "spectator" at the summit.

Mr Cameron is said to see it as important for Britain to maintain pressure on the eurozone to sort out its problems and to encourage the G20 nations - who together make up 85% of world GDP - to send a clear message that they are committed to taking the action necessary to boost confidence and support global economic recovery.