Five days to save world economy from catastrophe: Britain’s warning to Europe as leaders battle to save the Euro

Saturday, October 22, 2011
By Paul Martin

Europe’s banks need another £110bn to protect themselves from potential eurozone debt defaults

By James Chapman and Hugo Duncan
22nd October 2011

Britain will tell European leaders they have five days to save the world economy from catastrophe, after it emerged that the continent’s banks could need another £110billion to protect themselves from potential debt defaults in the eurozone.

David Cameron is due in Brussels tomorrow for talks with 26 other countries over a deal aimed at preventing a collapse of the single currency and stemming the bloc’s debt crisis that threatens to drag the UK back into recession.

A serious rift has opened up between France and Germany over a rescue deal, meaning a second summit of eurozone leaders will be held on Wednesday. Britain believes that if a deal is not struck in the ‘critical’ days ahead, market chaos will ensue.

Mr Cameron is set to agree to new rules affecting the banking sector at this weekend’s summit, which will require those exposed to the debts of stricken states such as Greece to hold more cash to shield themselves against potential defaults.

Banks are expected to be given a deadline by which they must amass at least £70billion – though some put the figure as high as £110billion – from the markets.

If they fail to meet the deadline, public sector bailouts will be ordered.

At Wednesday’s meeting, eurozone members will have to increase massively a bailout fund for debt-stricken economies and accept huge losses related to Greek debt, amid growing acceptance that the country cannot accept further austerity measures and has no hope of paying its own way.

Chancellor George Osborne, who is meeting his fellow finance ministers in Brussels today, said yesterday: ‘The coming days will be critical for resolving the crisis in the eurozone.

‘A resolution to the eurozone crisis would be the biggest boost to growth in Britain and around the world.’

The Rest…HERE

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