Clegg fears second credit crunch

Sarah Davidson

July 19, 2011

European leaders are due to meet on Thursday this week for an emergency summit to agree a plan to involve the private sector to bail out Greece, The Daily Telegraph reports.

On the BBC’s Andrew Marr Show, Clegg was asked: “How worried are you that we are on the edge of another really serious world financial crisis?”

He replied: “I’m incredibly worried. I think the gravity of the uncertainty in the United States, which is basically a product of political gridlock, and the growing fiscal crisis, sovereign debt crisis in the eurozone is immensely serious.”

He said that it was foolish to think that Britain was able to “wash our hands of it” because the country was not a member of the eurozone.

He said: “This has a direct impact on British jobs, on the livelihoods of millions of people in this country. That’s why I believe we should play an active role behind the scenes … to help eurozone members make the reforms necessary to create a strong, prosperous eurozone in the future.”

For leaders to agree on whether banks and bondholders should bail out Greece is vital to prevent the country from defaulting on its $500bn debt.

Eurozone finance ministers agreed last week to make the European Financial Stability Facility, the eurozone’s multibillion-euro rescue fund, more flexible in order to purchase debt, but governments, the ECB and the commission in Brussels cannot agree how to resolve the problem.

Yesterday shares in Britain’s largest banks hit 12-month lows, which the Telegraph reported was down to the markets taking fright at Friday‚Äôs bank stress test results.

Barclays’ shares closed down 7% at 207.65p, while shares in partially state-owned lenders Lloyds Banking Group and Royal Bank of Scotland ended the trading session down more than 6%.

Even shares in Standard Chartered, which did not take part in the exercise, and HSBC, which did but passed with flying colours, were hit, closing the day down 0.8% and 1.5% respectively.

The falls were largely due to a worse than expected performance by the UK’s banks in the tests, although several City analysts said the treatment of British lenders was harsher than for European rivals.

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