U.K. Prime Minister David Cameron said it would be “madness” to introduce a Europe-wide tax on financial transactions and called on euro-area leaders to focus instead on an immediate fix to their debt crisis.
At a cost to economic growth of 200 billion euros ($260 billion) and 500,000 jobs, Cameron said the proposal is a distraction given the greater problems affecting the continent. Fixing Greece’s fiscal woes, building firewalls to halt contagion and recapitalizing banks are the priorities, the premier said.
“To be considering this at a time when we are struggling to get our economies growing is quite simply madness,” Cameron said in a speech today to the World Economic Forum in Davos, Switzerland.
Cameron is looking to exports and investment to boost an economy teetering on the edge of a second recession in three years. The International Monetary Fund forecast this week that the economy of the 17-nation euro area, Britain’s largest trading partner, will shrink 0.5 percent in 2012 as a result of the debt crisis. Cameron suggested today that Germany and the European Central Bank should do more to underpin the euro.
‘Do Even More’
“The flip side of austerity in the deficit countries must be action to put the weight of the surplus countries behind the euro,” Cameron said. The ECB is already acting “and could do even more” to alleviate the crisis.
Cameron suggested that euro leaders might follow the proposals of IMF Managing Director Christine Lagarde for “a system of fiscal integration and risk sharing, perhaps through the creation of euro-area bonds to make that support work.”
The euro area is in a “fairly protracted recession” and European leaders will shift their focus toward fighting rising unemployment, Stephen Roach, non-executive chairman of Morgan Stanley Asia, said today.
“Grappling with the crisis is definitely understandable, but I think the debate is going to shift to fighting recession in Europe,” Roach said in an interview with Bloomberg Television’s Maryam Nemazee in Davos. “Europe is in a recession now, and it’s likely to be a fairly protracted one with a very limited recovery in the years ahead.”
Talks on a debt swap to avert a Greek default resume today as international policy makers squabble over the mounting cost of the rescue.
The IMF cut its 2012 U.K. growth forecast to 0.6 percent from 1.6 percent. Ernst & Young said the U.K. economy may contract again the first quarter, which would produce its first double-dip recession in more than three decades.
An online survey by Ipsos MORI in 24 countries showed 92 percent of Britons saying the economy in a bad situation, compared with 95 percent in France and Italy and 96 percent in Spain. In Germany 61 percent of respondents said their economy is in a good situation. Ipsos Mori polled 21,245 people between Jan. 6 and Jan. 19.
“Tinkering here and there and hoping we’ll drift to a solution simply won’t cut it anymore,” Cameron said of the euro crisis. “This is a time for boldness, not caution.”