Osborne warns Eurozone that decisive action must be taken now

The UK government is becoming increasingly concerned about the situation in the eurozone and the fact that there does not appear to be the political will to address it. One government source complained to me earlier today that “unless they get their act together the eurozone are in danger of fiddling while Rome burns.”

Tonight, in a major departure from Britain’s previous softly-softly approach to the issue, George Osborne is issuing a statement calling on the eurozone countries to take “decisive action” to “prevent market uncertainty doing real damage to the world economy.”

The Chancellor calls on eurozone countries to:

“…now set out in detail how they plan to expand the scale of the financial tools at their disposal, carry out credible stress tests backed up with recapitalisation for the most vulnerable banks, involve the private sector to make Greece’s debt burden more sustainable, earn fiscal credibility through concrete action to reduce excessive deficits, and push forward structural reforms to boost growth.”

From this, I think we can take it that the British government thinks that given the eurozone countries are determined to perserve with this currency union, the only solution to this crisis is far greater fiscal integration within it. This would, in all likelihood, require treaty change which would — as David Cameron noted in his interview with The Spectator — provide “opportunities for Britain to maximise what we want in terms of our engagement with Europe.”

At the end of his statement Osborne warns that Britain is “not immune to the instability on our doorstep.” Here it is in full:

“The time has come for decisive action to address the crisis in the eurozone and prevent market uncertainty doing real damage to the world economy. Eurozone countries should now set out in detail how they plan to expand the scale of the financial tools at their disposal, carry out credible stress tests backed up with recapitalisation for the most vulnerable banks, involve the private sector to make Greece’s debt burden more sustainable, earn fiscal credibility through concrete action to reduce excessive deficits, and push forward structural reforms to boost growth. The results of the action that Britain has taken are plain to see – despite having inherited one of the largest budget deficits our long-term interest rates are among the lowest in Europe. We are seen as a safe haven in the financial storm, but we are not immune to the instability on our doorstep.”