CAMERON WARNING ON THE EURO

The PM has warned the Eurozone leaders that  action is need to ensure the survival of the Euro

David Cameron issued a warning to eurozone leaders today that they need to take some "pretty decisive steps" if the single currency is to survive.

The Prime Minister said he believed the "most likely outcome" was that the euro would hold together, despite the current debt crisis.

But he stressed that in the longer term it was essential to address the "fundamental competitiveness divide" between the powerful German economy and the weaker southern states.

"I think that the most likely outcome is, yes, it will hold together but it has to take some pretty decisive steps," he told Sky News's Boulton & Co.

"There are the short-term sticking plaster steps of a proper firewall to prevent contagion around Europe, a much more decisive settlement for Greece which the problem still hasn't gone away, strengthening the European banks.

"But that is only the short term. The longer term is that you have got to address the fact that there is a lack of competitiveness between Germany on the one hand and many of the southern European countries on the other.

"You can't have a single currency with those fundamental competitiveness divides unless you have massive transfers of wealth from one part of Europe to another."

Mr Cameron stressed it was in Britain's interest to see the eurozone recover, as the current crisis was having a "chilling effect" on the UK economy.

"We have got to help deal with it," he said.

He did not rule out additional UK support for the International Monetary Fund on top of the £10 billion approved by the Commons in July - a move which would infuriate Tory MPs.

"We have set out our conditions for contributing more to the IMF. We support countries and not currencies or currency zones. The IMF shouldn't be doing what the eurozone itself should be doing," he said.

Mr Cameron acknowledged that his decision last month to wield the British veto to block a new treaty of all 27 EU member states had created a "pressure point" in his coalition with the Liberal Democrats.

However, he stressed that he continued to work closely with Deputy Prime Minister Nick Clegg.

"We both wanted a treaty at 27, but with safeguards for Britain," he said.

"We both agreed if we couldn't get those safeguards we couldn't agree a treaty. That is what happened. Of course the Liberal Democrats were disappointed with that," he said.

PA 2012