The eurozone debt crisis is “killing off” Britain’s fragile economic recovery and European leaders are close to the “moment of truth” after more than two years of uncertainty, British Chancellor of the Exchequer George Osborne wrote in a newspaper article.
Osborne said that decisions taken by the currency bloc in the coming months could determine the economic future of the whole of Europe for the next decade and beyond.
As eurozone finance ministers agreed to lend Spain up to 100 billion euros to prop up its banks, Osborne said there were “already signs that a solution will be found” to the debt crisis.
“Our recovery — already facing powerful headwinds from high oil prices and the debt burden left behind by the boom years — is being killed off by the crisis on our doorstep,” Osborne wrote in the article published on the Sunday Telegraph’s Web site on Saturday.
Britain has benefited, along with the US and Germany, from investors seeking a safe haven from the eurozone’s troubles, driving down UK borrowing costs, he added.
However, the uncertainty in Europe, Britain’s biggest trading partner, has stifled business investment and choked its recovery, he wrote.
“We are approaching a moment of truth for the eurozone. After more than two years of uncertainty, instability and slow growth, decisions taken over the next few months could determine the economic future of the whole European continent for the next decade and beyond,” Osbourne added.
Britain’s economy has fallen into its second recession since the financial crisis started after a shock contraction at the start of this year, heaping pressure on British Prime Minister David Cameron’s coalition government.
“A resolution of the eurozone crisis would do more than anything else to give our economy a boost,” Osbourne wrote.
The eurozone must follow the “remorseless logic” of moving toward much greater fiscal integration, he added. That would mean stronger economies doing more to help weaker ones and more pooling of resources, possibly through the issue of common euro bonds.