George Osborne has said the eurozone risks slipping back into a crisis with negative consequences for the British economy.
The chancellor spoke out about his concerns before a meeting of the International Monetary Fund, which warned this week about the health of eurozone banks.
Osborne said a slowdown in Europe was already having an impact on UK exports and more measures were needed to get through the financial turbulence that probably lies ahead.
With seven months to go before the election, Osborne and the Conservatives lead Labour in opinion polls about economic competence. However, this could erode if Osborne is seen to be losing his grip on the economy and is unable to fend off another slowdown in the UK after years of austerity.
“This is a critical moment for the British economy,” the chancellor said in a video clip for broadcasters. “The eurozone risks slipping back into crisis. Britain cannot be immune from that. Indeed, it is already having an impact on our manufacturing and our exports.
“We need to send a clear message out around the world that we have a stable economy, that our economic plan is working, and that we’re not going to deviate from that economic plan, so that people around the world know that while Britain is not immune from what is going on in the world, we can take steps to protect ourselves.”
The British Chamber of Commerce has already warned of a slowdown in exports as Germany threatens to head back into recession. Osborne said: “Britain is part of a global economy, but that doesn’t mean Britain is just going to be buffeted by the storms. We can take steps to weather those storms: we can stick with our long-term economic plan, work through that so that we can deliver economic stability, we are cutting our business taxes, making the UK a place to invest, and that will protect jobs right here.”
He said slower growth had been taken into account by the Office for Budget Responsibility, which is forecasting growth of around 0.6% per quarter compared with the 0.9% seen in recent months.
But he added: “Clearly the UK is going to be affected by what’s going on in its biggest export market. Now, we can take steps to deal with that: we can go on entrenching economic stability, we can go on making sure we’re exporting more to the rest of the world. Today, we take a very big step in this country when we issue our first Chinese government bond in a Chinese currency – that’s part of our plan to connect to growing parts of the world and make us less dependent on our neighbours in Europe.
“These are all steps we can take and we’re in a much better place to weather this storm because of the action we’ve taken over the last four years.”
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