Cameron to call for decisive action on eurozone

David Cameron will on Monday urge Germany and the European Central Bank to intervene decisively in the eurozone crisis, warning the alternative is either a break-up of the single currency that would damage Britain and the world or “perpetual stagnation”.

Speaking in Mexico ahead of the G20 summit, Mr Cameron will say the stakes facing world leaders are “incredibly high”, warning of the risk of protectionism and “backsliding” on previous promises to shore up banks.

Mr Cameron’s lecture in a speech to world business leaders will be greeted with weary frustration in Berlin, where commentary from the sidelines of the eurozone crisis from Mr Cameron and George Osborne, chancellor, is causing irritation.

Although the prime minister is willing to offer advice to world leaders – broadly that they should follow Britain’s economic example – his opponents say Mr Cameron lacks the focus and energy that Gordon Brown brought to G20 economic affairs.

Mr Brown’s chairmanship of the G20 in London in 2009 was seen as contributing to a rare and decisive moment of global solidarity; the gathering in Los Cabos on the Mexican Pacific coast has lower ambitions.

The former Labour prime minister wrote for Reuters last week that EU leaders were guilty of adopting “well-meaning half measures”, adding: “If there is a failure of global leadership next week [at the G20], not only will Europe be condemned to a lost decade but the whole world will pay a fearful price.”

Ed Miliband, Labour leader, claims that Mr Cameron has isolated himself in Europe and that his views on the economy represent “the last gasp of the old”.

That is not how Mr Cameron sees it. The prime minister, who will be in the air en route to Los Cabos when the markets open on Monday, believes the UK’s policy of fiscal consolidation and monetary activism should be deployed across the world.

Speaking after the Greek election results, Mr Cameron will argue that the “core” of the eurozone – principally Germany – and the ECB need to do more to “support demand and share the burden of adjustment”.

“If the eurozone is to stay together then it has to make at least some of these difficult decisions,” he will say. “The alternatives to action that creates a more coherent eurozone are either a perpetual stagnation from a eurozone crisis that is never resolved or a break-up.”.

After last week’s action by the Bank of England to provide cheaper funding for banks to support lending, Mr Cameron will tell the G20 that other central banks should get “off the sidelines” and start to promote growth.

Mr Cameron is being accompanied by about 25 British business leaders representing companies including HSBC, Green-Tide Turbines, Rolls-Royce and Oxford Business Group, as he combines the G20 with a business push in Mexico.

The prime minister will tell his audience he is pursuing an “unashamedly pro-business agenda”, although some have warned that his government’s wavering commitment to renewable energy schemes could harm the investment climate.