Cameron issues eurozone debt warning

A failure by the eurozone to deal with its debt crisis could send the whole world economy back into recession, prime minister David Cameron has said.

Speaking to the Financial Times, the prime minister blamed the situation in the multi-nation single currency bloc for the present level of uncertainty in the world economy, stating: ''The eurozone is probably contributing more to that uncertainty and lack of confidence than anything else.

"You either make the eurozone work properly or you confront its potential failure.''

Mr Cameron called for a "bazooka" approach that would see more "firepower" given to the euro bailout fund.

Should there be a failure of European leaders to respond adequately, the crisis could affect Britain severely as a major trading partner with the EU, with the resultant loss of jobs potentially leaving many people with new debt problems.

Some action has already been taken to stop Euroopean banks collapsing, with Belgian financial services firm Daxia to be bailed out under a joint agreement involving France, Belgium and Luxembourg, while France and Germany have claimed an agreement has been reached on the recapitalisation of banks in Europe.

This could involve a process very similar to that which saw UK banks like Royal Bank of Scotland, HBOS and Northern Rock nationalised or partly nationalised.

Mr Cameron's comments come after the Bank of England sought to do what it can to help the economy in the UK, through a £75 million extension of the quantitative easing scheme last week.

In an interview with Sky News after the measure was undertaken, the Bank's governor Mervyn King warned that Britain and the world is on the brink of "the most serious financial crisis at least since the 1930s, if not ever".

Posted by Paul Thacker