David Cameron will tell Angela Merkel on Thursday that she needs to act now to bring the eurozone back from the brink of disaster – a message likely to stoke irritation in Berlin and other eurozone capitals.
The prime minister will meet the German chancellor this afternoon as concern grows in London about the effects a eurozone break-up could have on the British economy.
It comes days after Mariano Rajoy, Spain’s prime minister, said his country was in a situation of “extreme difficulty”, while Cristóbal Montoro, his budget minister, warned of the problems the country was having selling sovereign debt.
A Downing Street spokesperson said: “The prime minister’s view has always been that decisive action needs to be taken to underpin the eurozone. Confidence in the markets is essential, and to regain that confidence decisive action needs to be taken.”
Mr Cameron spoke to Barack Obama, US president, on Wednesday, as outside pressure builds for a new eurozone rescue plan, something that has annoyed leaders within the bloc.
Mr Cameron’s spokesperson said: “[Mr Cameron and Mr Obama] agreed on the need for an immediate plan to tackle the crisis and to restore market confidence as well as a longer-term strategy to ensure a strong single currency.”
The prime minister will develop the ideas he raised in a speech in Manchester on May 17, when he warned the eurozone needed to “make up, or it is looking at a potential break-up”.
Britain has called for a new package with four elements: a bigger fund to provide a firewall against further serious problems; better capitalised banks; shared eurozone bonds and a more active monetary policy from the European Central Bank.
The last of those options became more distant on Wednesday when the ECB resisted calls to lower interest rates, keeping them at 1 per cent, increasing pressure on politicians to sort out the currency’s problems instead.
Germany has refused to back both a more active ECB and eurozone bonds, triggering tension not only with the UK and the US but increasingly with central members of the currency bloc, including France and Spain.
Ms Merkel said at the weekend: “You can’t demand eurobonds but not be prepared for the next step in European integration. We won’t be able to create a successful currency like that and no one outside will lend us money any more.”
German officials were annoyed by attempts by members of the Group of Eight to discuss the eurozone’s problems at length when the group met at Camp David, the US presidential retreat, last month. But Mr Cameron was equally riled to find the subject of Greece was only briefly discussed at the end of an informal European Council meeting two weeks ago.
Although officials in Berlin are irritated with being lectured to by the UK, they say Ms Merkel understands the pressure Mr Cameron is under to show his own party that he is not ignoring the threat of a currency break-up.
But the tensions are likely to become more acute in the run-up to two big meetings this month – the G20 summit in Mexico and the EU’s annual summer conference in Brussels.