David Cameron and Barack Obama demand ‘plan’ for euro

 
State dinner: David Cameron and Barack Obama
Craig Woodhouse6 June 2012
WEST END FINAL

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David Cameron and Barack Obama today called for an “immediate plan” to tackle the eurozone crisis.

They piled pressure on European leaders to take decisive action as fears about the future of the single currency continued to spread.

The demand came shortly after Spain admitted for the first time that it can no longer raise money on the markets to deal with its debts and made its strongest call yet for European cash to help rescue its banks.

And the need for urgency was underlined again today as six German banks and three in Austria were hit by a credit rating downgrade, with ratings agency Moody’s blaming “the increased risk of further shocks” in the eurozone.

The Prime Minister and President Obama reached their joint position during a phone call last night, Downing Street said. Before the G20 summit in Mexico this month, the two men “agreed on the need for an immediate plan to tackle the crisis and to restore market confidence, as well as a longer-term strategy to secure a strong single currency”.

Markets rallied today after Spain’s economy minister Luis de Guindos said there were no immediate plans in Madrid to seek a bail-out for its banking sector — which analysts say needs 40 billion of extra cash.

“We are not preparing anything,” Mr de Guindos said, insisting Spain would await a series of reports on the state of the sector due later this month.

Madrid favours European rescue cash to help shore up its banks rather than a fully-fledged bail-out with strings attached, but is meeting opposition from Germany. Volker Kauder, parliamentary leader of Angela Merkel’s conservative bloc in the German parliament, today signalled that rescue money could only go to Spain as a country, rather than to help its banks. “I don’t see this possibility,” he said of the latter option.

Mr Cameron will meet Chancellor Merkel in Berlin tomorrow.

Spain’s prime minister, Mariano Rajoy, is leading calls for Europe to agree a banking union that would allow states to share their debts.

The European Commission has announced proposals to stop taxpayers’ money being used to bail out failed banks — but these are not due to come into force for several years.

European Central Bank president Mario Draghi said risks to the eurozone economy had increased, and warned of “heightened uncertainty weighing on confidence and sentiment” as interest rates were left unchanged at one per cent today.

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