UK Prime Minister, US President: Action Needed To Stabilize Euro Zone

Action is needed now to stabilize the euro zone, No 10 has said – as David Cameron prepares to meet Angela Merkel to discuss Europe’s financial woes.

Downing Street said the prime minister and US President Barack Obama had agreed on the need for an “immediate plan” in a phone call late on Tuesday.

Amid fears Spanish banks may need external help, Brussels has set out plans for a euro zone “banking union”.

The UK has welcomed the move but said more needs to be done.

The European Commission said its proposed new regulatory framework would allow central authorities to take “decisive” action before a bank gets into trouble to prevent taxpayers having to pick up the tab for bailing it out later on.

The UK said the plans were a “positive step in tackling the problem of ‘too big to fail’ in the banking sector”.

The UK has said strengthening leading banks was one of a number of steps needed to restore market confidence in the euro zone.

David Cameron is pressing for a series of other measures including a larger bailout fund, euro bonds and structural reform within the European Union – which could lead to greater fiscal burden-sharing between the poorest and wealthiest countries.

“The euro zone has taken some steps to put its house in order, but more needs to be done,” a No 10 spokeswoman said.

No 10 played down any suggestion of a rift with German Chancellor Angela Merkel about the way forward ahead of Thursday’s meeting, saying “all leaders in the euro zone understand the need for urgency” to deal with current problems.

The prime minister spoke to the leaders of Canada and New Zealand on Wednesday as well as President Obama while Chancellor George Osborne spoke to his counterparts in G7 countries to “take stock” of the euro zone’s position ahead of the G20 summit in Mexico later this month.

Meanwhile, the chairman of the influential Treasury select committee has called for the International Monetary Fund to play a greater role in resolving the euro zone’s structural weaknesses and to lead contingency planning for Greece’s possible exit from the single currency.

Tory MP Andrew Tyrie said the IMF should evaluate the costs and benefits of a smaller euro area since Germany was “unlikely to maintain the citizens of Greece in the style to which they are accustomed”.