EU demands £25 billion lifeline from the UK

[-Pastor-Dale-Morgan-]

Perilous Times

EU demands £25 billion lifeline from the UK

David Cameron will come under pressure today to resist demands to contribute more than £25 billion to a new eurozone bail-out.

By Tim Ross, and Bruno Waterfield

9:51PM GMT 18 Dec 2011
The Telegraph UK

European finance ministers will aim to agree a new €200 billion (£167.7 billion) loan to the International Monetary Fund as part of a deal to save the single currency.

Three quarters of the money is expected to come from eurozone members, but Britain will also be asked to provide funds.

Figures suggest European Union officials expect British taxpayers to be the second largest contributor. The Prime Minister has repeatedly promised not to provide any extra funding for the IMF for the specific purpose of saving the euro and Britain is already liable for £12 billion of loans and guarantees to Ireland, Greece and Portugal.

Earlier this month, EU countries set today as the deadline to raise up to €200  billion in new loans for the IMF to deal with the eurozone crisis.

Finance ministers will hold a conference call in an attempt to reach agreement on the war chest.

An EU official said Britain was still expected to contribute €30.9 billion (£25.9 billion), leaving the country as the second biggest contributor to the new IMF fund behind Germany and equal with France.

Any suggestion that Britain will pay more towards the bailing out debt-ridden eurozone economies will cause anger among Tory Euro-sceptics, particularly if the eurozone nations do not pay their fair share.

Douglas Carswell, the Conservative MP for Clacton, said: “George Osborne has spent 20 months going along with the bail-out and borrow consensus.

“It has cost this country billions of pounds in liabilities which dwarf all the austerity measures. He needs to call a halt now.”

Mr Carswell called for eurozone countries to be allowed an “orderly default” on their debts.

Peter Bone, the Tory MP for Wellingborough, urged the Chancellor to stand up for the British “national interest”, even if he is as isolated in today’s meeting as Mr Cameron was earlier this month in Brussels.

Ten days after Mr Cameron deployed his veto in Brussels, the eurozone crisis appeared no closer to resolution.

Yesterday Vince Cable, the Liberal Democrat Business Secretary, when asked about Coalition tensions over the Prime Minister’s decision, admitted he regularly considered resigning from the Cabinet, and accused Mr Cameron of blocking the EU deal for “largely political” reasons.

Boris Johnson, the mayor of London, suggested that the eurozone was likely to break up in the next 12 months. “I’d be amazed if we were all sitting here next year and the euro had not undergone some sort of change,” he told BBC One’s The Andrew Marr Show.

He also suggested Greece would be the first to leave, adding: “I think it highly likely that there will be a realignment. Ouzo will be substantially cheaper.”

His view was shared by Sir Philip Hampton, the Royal Bank of Scotland’s chairman, who told Jeff Randall on Sky News: “I think it’s likely that one country, a small country, will drop out.”

However, Nick Clegg, the deputy prime minister, warned Euro-sceptics should not predict the demise of the euro with “a sense of glee” as this would put “millions of people’s livelihoods” at risk.

Mr Cameron and Mr Osborne are aware how toxic the issue of providing funds to help the eurozone is when Britain is not a member of the euro could be. However, they have also warned that the British economy will be badly damaged by a collapse of the single currency.

“Britain hasn’t given a definite no,” a European diplomat said, adding that the possibility of British opposition was not seen as the major obstacle to the plan.

The Treasury said the Chancellor would reject any fresh demands for a British contribution to a eurozone bail out.

However, a spokesman left open the possibility of a broader IMF deal being reached in future, involving other G20 countries.

The Treasury spokesman said: “As a long standing supporter of the IMF, Britain stands ready to increase IMF resources alongside other countries around the world in order to help any country in distress.

“But we will only provide more resources for the IMF if the eurozone do more to strengthen their firewall, and we will not contribute to anything that is only available to eurozone countries.

“Nor will we participate in an increase in IMF resources that only comes from EU countries without the participation of other G20 countries.”

Under IMF rules, Britain would underwrite a portion of loans to struggling countries, but only pay out if they defaulted. Only countries that are members of the IMF and contribute to its wealth can apply for loans.

The Prime Minister has argued that no country has ever lost money by lending to the IMF.

Yesterday it emerged that the Foreign Office was drawing up contingency plans to evacuate up to a million expats from Spain and Portugal in the event of a European banking crash.

The planning was even said to include the nightmare scenario of thousands of penniless Britons sleeping at airports with no money to return to the UK.