PM discusses euro crisis with Obama

Asian Image: David Cameron and US president Barack Obama discussed the eurozone crisis with key allies David Cameron and US president Barack Obama discussed the eurozone crisis with key allies

David Cameron has held talks with US president Barack Obama and other key allies amid mounting fears over the eurozone crisis.

The Prime Minister and Mr Obama discussed the situation on the telephone while the premiers of Canada and New Zealand visited Downing Street.

Chancellor George Osborne also took part in a "stock-taking" conference call with counterparts from the G7.

The contacts are part of the build-up to next week's G20 summit in Mexico, where world leaders will again attempt to agree a way through the problems.

Fears have been mounting over Spain's ability to raise funds on international markets at affordable levels.

Weaker-than-expected manufacturing and jobs data in powerhouses such as the US and China have also driven down share indexes around the globe.

In a paper for the Centre for Policy Studies think-tank, the chairman of the Treasury Select Committee, Andrew Tyrie, warned that "markets doubt the capacity of the Spanish government to service the debt".

"Among other things, they doubt whether the Spanish tax system can raise the necessary revenue while the government simultaneously engages in the deep structural reforms needed to improve productivity and secure internal devaluation. Without those enduring reforms, another eurozone crisis would emerge in time, even after a bailout."

He called on the IMF to ease the pressure by using the current "breathing space" to develop contingency plans for Greece to leave the Eurozone. "Only the IMF has the necessary detachment and economic credibility to help sort out this crisis," he wrote. "These will be testing times for Christine Lagarde - her credibility, as well as that of the IMF, is on the line."

Mr Cameron is due to visit Berlin later this week, where he is expected to urge German Chancellor Angela Merkel to push for tougher fiscal governance in the eurozone.

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