G20: Pressure On Europe To Ease Eurozone Danger

Pressure is growing on eurozone countries at the G20 summit in Mexico to find a resolution to what the head of one international organisation described as "the single biggest risk for the world economy".

Despite the victory of a pro-euro party in Greece's elections at the weekend, there was no announcement of the formation of a government in Athens , amid growing signs of impatience among other G20 nations.

World Bank chief Robert Zoellick said: "We are waiting for Europe to tell us what it's going to do."

But European Commission President Jose Manuel Barroso defended the eurozone, insisting "the challenges are not only European, they are global".

Prime Minister David Cameron urged Greece's centre-right New Democracy party to move "decisively and swiftly" to form a new administration, warning that "delay could be deadly".

But he acknowledged that the crisis in the eurozone could rumble on "for some time" and made clear that he is looking elsewhere in the world for trading partners to replace lost demand from the UK's traditional export markets in Europe.

One senior diplomat said that the eurozone faces "a long, hard road that has got to be travelled" before its problems are over.

And Jose Angel Gurria, the head of the Organisation for Economic Co-operation and Development (OECD) , said the crisis was "the single biggest risk for the world economy".

Mr Cameron repeated his call for "core" eurozone states like Germany, as well as the European Central Bank, to take the decisive steps towards fiscal and banking union which he believes are necessary for the euro to function properly.

The Prime Minister said G20 members in the Pacific resort town of Los Cabos were putting "constructive pressure" on Germany.

But he acknowledged that Chancellor Angela Merkel faces political difficulties at home in delivering economic changes which could see German taxpayers making regular payments to support less competitive nations like Greece.

"We have to understand the German difficulties. It is very difficult politically to take the steps that are required economically," said Mr Cameron.

"But nonetheless if you want a functioning single currency you have to take at least some of those steps. You need to have elements of banking union, fiscal transfers and so on."

Mr Cameron said the eurozone faced three alternatives, the most positive of which would involve "action to strengthen the eurozone, to make it more coherent".

Failure to take these steps would mean that "dominoes start to fall, which would have very severe financial consequences across the world and would seriously affect us", he said.

But he made clear that he was taking seriously the possibility that the eurozone will take "enough financial action and just enough political and economic action to keep the show on the road but without solving the fundamental problems", leading to the risk of "perpetual stagnation".

And he indicated that part of Britain's preparations for such an outcome involved building trade links with emerging economies like Mexico.

"It may be that the eurozone crisis is going to continue for some time, in which case the UK must do all it can to put its own house in order and link up with the fastest-growing parts of the world," said the PM, who has brought a 25-strong trade delegation of British companies to Mexico.