Darling calls for decisive action on Greece

 

The International Monetary Fund and the euro zone must solve the Greek debt crisis as soon as possible, Chancellor Alistair Darling said on Wednesday.

In a speech in Edinburgh, Darling warned that the British and global economic recovery was still not assured and needed nurturing.

"All the more reason to deal urgently and decisively with the problems in Greece. That's why it is so important for the IMF and the euro-group to resolve these problems now. There is no time to lose" he said.

Greece is in talks with the IMF and the European Union on getting a 45 billion euro (39.2 billion pound) bail-out package to prevent a sovereign default. Standard & Poor's downgraded the credit rating of Greece and Portugal to junk status Tuesday.

The Conservatives' shadow chancellor George Osborne - who would become finance minister if his party won the election on May 6 - said the ratings cuts highlighted the need for government borrowing to come down urgently.

"And let me say one other thing about what is happening in Greece - thank God we are not in the euro. For if we had been in the euro over the last decade our boom would have been bigger, our bust would have been deeper, and we would now be bailing out Greece." The Conservatives have repeatedly warned that urgent action is needed to bring down the deficit - currently running at over 11 percent of GDP.

They have so far announced lower borrowing of 6 billion pounds compared with Labour, about 3.5 percent of this year's deficit. The three main parties have been largely silent on the scale of the spending cuts analysts say will have to be made.

"Given the broad consensus across the political parties about the need to reduce the public deficit, and the closeness of the main parties' stated consolidation plans, we do not believe that the election outcome will materially change the broad outlook for public borrowing and debt" said Simon Hayes, economist at Barclays Capital.

Still, Darling said that withdrawing support from the economy now, as the Conservatives have been advocating, could suffocate the recovery.

"Our economy remains balanced between recession and recovery. Continued recovery is not a given. It depends on making the right decisions now and in the future" he said.