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Cameron urges 'decisive' action on euro crisis

By Geir Moulson

Associated Press

Published: Friday, Nov. 18 2011 8:35 a.m. MST

German Chancellor Angela Merkel, right, and Britain's Prime Minister David Cameron address the media during a news conference as part of a meeting at the chancellery in Berlin, Germany, Friday, Nov. 18, 2011. The German and British leaders met amid tensions over efforts to resolve the eurozone debt crisis and the future of the European Union.

Michael Sohn, Associated Press

BERLIN — British Prime Minister David Cameron urged "decisive action" Friday from the 17 countries that use the euro as they try to contain their spiraling debt crisis, while German Chancellor Angela Merkel cautioned against expecting too much.

Prior to their meeting in Berlin Friday, the European Central Bank's president, Mario Draghi, ratcheted up the pressure on politicians to get on with the "urgent implementation" of a weeks-old decision to increase the firepower of their rescue fund.

"Where is the implementation of these long-standing decisions?" he asked a conference in Frankfurt.

Cameron has been at the forefront of calls in recent weeks for eurozone leaders to step up their efforts to deal with the debt crisis. It has already seen three small countries get a financial bailout and is now threatening much bigger Italy and Spain.

Cameron, whose country doesn't use the euro and is skeptical about deepening European integration, said "all the institutions of the eurozone have to stand behind and back the currency and do what's necessary to defend it."

In the markets, that's interpreted as a call to the eurozone to back giving the European Central Bank more power to solve the crisis, possibly through buying up more potentially-bad government debt or by giving it the "lender of last resort" power that other central banks have.

Merkel has said repeatedly that there is no single quick-fix solution to halt the crisis. She has rejected the idea of jointly backed "eurobonds" and suggestions that the ECB launch a massive bond purchase program to reduce the lending costs of countries such as Italy.

"I think that you win back credibility by using the strength you have, and the British demand that we should put a lot of strength into winning back credibility for the euro is right," she said.

"But we also have to take care not to pretend to have strength that we don't have, because markets very quickly figure out that that won't work."

Cameron and Merkel, whose country has the eurozone's biggest economy and has heavily influenced its rescue strategy, sought to downplay their differences — but appeared to make no progress toward bridging them.

The two countries "agree that a strong, successful and sustainable euro is in all our interests," Cameron told reporters. "The chancellor and I would agree that ... we need to take decisive action to help stabilize the eurozone."

Cameron, like the ECB's Draghi, pointed to the need to translate into action decisions taken by last month's EU summit to put together a second bailout package for Greece and measures to increase the firepower of the bloc's rescue fund, the €440 billion ($600 billion) European Financial Stability Facility.

Merkel and Cameron did emphasize their common interest in European competitiveness and in mending public finances — and called for an increase in next year's EU budget to be limited to the rate of inflation.

But tensions remained on two key fronts.

Merkel wants changes to European Union treaties that are meant to strengthen the eurozone but would need all 27 EU members' approval — a potentially long and messy process.

It could also be awkward for Cameron, who last month saw dozens of lawmakers from his Conservative Party back a call to hold a national referendum on leaving the EU, in the biggest rebellion against his coalition government since it took power in May 2010.

"Germany has her interests and so does Britain," Cameron said.

No progress appeared to have been made on a financial transactions tax, which would be slapped on financial trades such as bonds and currencies.

Merkel wants to introduce a tax on financial transactions in Europe, given that none appears possible at the global level. That idea has strong political support in Germany but little in Britain, which fears business will be driven to less-regulated countries.

"We agree that, on a global basis, both countries would introduce it immediately, but in purely European terms no progress has been made," Merkel said.

Meanwhile, Cameron sought to deflect criticism over Britain's role in Europe. A headline in Friday's edition of Germany's Bild asked: "What do the English still want in the EU?"

Cameron responded that "Britain is in Europe because we are an engaged trading nation ... we want as a trading nation to be engaged, to be positive, to be active."

And Merkel, who has been keen to assure EU countries outside the euro that they won't be left behind, said that "Britain and Germany need each other in the European Union."

EU countries need to have "a bit of tolerance for differing views," she added.

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