September 14, 2011

The Eurozone crisis is getting plenty of attention in UK political circles. At Prime Minister’s Questions, David Cameron told MPs that “France and Germany are meeting to stop Greece going bankrupt”

We’re not sure that this is exactly what Angela Merkel had in mind yesterday when she said everyone needed to “weigh their words very carefully” to avoid alarming the financial markets.

Deputy prime minister Nick Clegg also devoted part of a speech earlier today to the situation in Europe.

“To quote Christine Lagarde, the new head of the IMF: ‘We are in a dangerous new phase’. A huge rise in oil and food prices. A slowdown in overseas markets. Continued turmoil in the Eurozone. Ongoing uncertainty in the US. Far from a one off shock, the 2008 banking crisis has set off a chain reaction that continues to reverberate around the globe.

In terms of the Eurozone, the real failure has not been the original concept of monetary union. It’s that the rules were never applied stringently enough. The Stability and Growth Pact was actively watered down in 2005, allowing members to wriggle out of their fiscal commitments to each other. Now we are seeing the effects.

But on a day like today, when people are talking openly about the possibility of Greek default, the key question is not: how do we seek to renegotiate the UK’s place in the European Union in a treaty that hasn’t even materialised yet. The single – most important question, the urgent question is what role can we play in helping the Eurozone avoid further turmoil, creating the stability needed for prosperity and jobs – in the Eurozone and in the UK too.”

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