Clegg: Euro Break-Up Would Harm Britain

Clegg: Euro Break-Up Would Harm Britain

Deputy prime minister Nick Clegg has issued a fresh warning about the drastic consequences of Greece leaving the euro for Britain and slammed the "piecemeal" response of EU leaders to the crisis.

On a visit to Berlin with business secretary Vince Cable, Mr Clegg said a Greek exit from the 17-country currency union could cause "unpredictable, irrevocable damage" across Europe.

"No rational person interested in the wealth and wellbeing of Europe's citizens could advocate taking such a risk," he said.

The Liberal Democrat leader added that some 3.5m British jobs depend on the EU economy, and 40% of exports go to the eurozone - making it vital that everything is done to secure the bloc's future.

His comments came as it was revealed Britain's economy is in a deeper recession that originally feared .

Revised data showed UK gross domestic product (GDP) shrank by 0.3% in the first quarter of the year - in stark contrast to Germany where the economy grew by 0.5% over the same period.

Mr Cable told Sky News that Britain, unlike Germany, was still suffering from the fall-out of the 2008/9 financial crisis.

The Lib Dem duo's visit to the country followed an 18th emergency EU summit to discuss the ongoing eurozone debt crisis.

But leaders failed again to produce a concrete solution or agree on how best to keep Greece in the single currency .

If Greeks vote in new elections on June 17 against the budget cuts and reforms tied to a second debt rescue, the EU, International Monetary Fund and European Central Bank, are expected to curtail drastically the funding which is keeping Greece solvent.

This would push Greece out of the eurozone and could cause incalculable risks for other weaker members, notably Spain.

The deputy prime minister said the policy response to the eurozone crisis has been "woefully fragmented" and that the decision-making process, lurching from one crisis summit to the next, is undermining public confidence.

"The tree is falling, and we are pruning one leaf at a time. It is piecemeal politics - endless tactics with no strategy," he said.

While in Berlin both Mr Clegg and Mr Cable also spoke in favour of eurobonds - an idea recently put forward by the new French president Francois Hollande - which would enable every eurozone country to borrow funds at the same rate, lowering the costs for more indebted countries.

But Germany is firmly against eurobonds as a short-term fix to the debt crisis.

Meanwhile, more grim data has come out of the eurozone, with the latest survey of business confidence in the 17-country bloc showing the worst monthly fall for nearly three years.

The Markit PMI index dropped to 45.9 points in May from 46.7 in April, with anything less than 50 signalling a slowdown.

In Germany, business confidence fell to a six-month low and in France the leading index for manufacturing activity fell to the lowest level for 37 months.

Jennifer McKeown, a senior European economist at Capital Economics, said that the data suggested that "the downturn has now really hit Germany".

"Spreading economic downturn will further reduce the currency union's chances of survival," she added.

Speaking on Jeff Randall Live, George Munoz, President of Munoz Investment Bank said: "If a solution doesn't come up in Greece, then everybody's attention will move away from Greece because another risk will hit the global economy, and that is the United states."

The former Assistant Secretary and Chief Financial Officer of the US Department of the Treasury, added:" A rise in taxes and cuts in our budget will cause a recession.

"If that occurs then you will have the eurozone and the US in recession - and there goes the economy tumbling again."