The eurozone is not doing enough to “stand behind” its currency, George Osborne warned yesterday.
Speaking during a visit to China, the Chancellor said there had been little evidence of the “pooled resources” needed to instil confidence in the markets.
Mr Osborne also warned that quicker action on the Greek debt crisis was needed to tackle instability in the single currency.
“I think what the euro needs to do is show convincingly that it can stand behind its currency,” he said.
“We haven’t actually seen much evidence of the pooled resources needed by the euro to actually provide confidence to the market that they will stand by their own currency.
“There’s lots of good signs that they are getting there and there are various summits planned for the next few months to ensure those resources are there.
“But I think that is what they need to do as well as resolve the Greek situation, I would say almost more so than the downgrading. The ongoing uncertainty about how they are going to write off some of the private sector debt in Greece is an almost greater source of instability in the eurozone.”
Mr Osborne reaffirmed that the government would be prepared to make extra funding available to the International Monetary Fund (IMF) alongside other G20 nations “if there is a strong case” but again stressed the cash must go to “countries, not currencies”.
“If I felt it was a decent request by the IMF, then, of course, I would be willing to go to Parliament and make that request,” he said.
“It wouldn’t ultimately be my decision, it would be a decision of Parliament.
“But let me be very clear, I would not do that with Britain acting alone, like other big G20 countries, and we are very clear this is not a substitute for eurozone providing money for dealing with its own currency.”
Ukip leader Nigel Farage said: “Once again the Chancellor uses this fudge phrase of ‘countries not currencies’, which will hardly fill the British public with confidence that the UK will not guarantee more British money to the IMF to support failing eurozone countries. “The fact that the Chancellor is also prepared to go to Parliament in order to get support to offer more money should alarm us greatly.
“We are constantly told that the UK is broke, yet the government seems prepared to gamble on offering more money to the IMF. This is something that British taxpayers will find hard to swallow.”
Prime Minister David Cameron’s official spokesman said the Chancellor was setting out the government’s position on a possible increase in UK funding for the IMF.
“He said if there were a strong case for additional resources, then he would be willing to take that case to Parliament,” said the spokesman.
“At the moment, there is a limit of £40 billion, of which £30 billion has already been subscribed. There is a headroom of £10 billion.
“If we went beyond that, we would require parliamentary approval.
“We have always said that we are supporters of the IMF and that the IMF should continue to play its traditional role of global backstop, providing stability to the world economy.
“If the IMF believes it needs more resources, and there is a strong case for that, then the UK would play a role. That is a consistent UK government position. We clearly benefit as a country from the IMF playing that role in supporting stability in the global economy.”
Finance ministers of the G20 group of the world’s biggest economies, including Mr Osborne, are expected to discuss the level of IMF resourcing when they meet in Mexico next month.